Demonetization Turns Out to Be a Double Whammy for India’s Microfinance Sector
The demonetisation of high-value currency notes has come as a double whammy for micro finance institutions (MFIs), which have temporarily stopped providing credit to their customers while loan repayments have also taken a major hit, industry sources said.
The institutions have deferred the repayment schedule of their borrowers for the next few days. In the last four-five days, repayment collections of about Rs 500 crore to Rs 600 crore ($74-89 million) has been deferred and with the lack of currency supply, the MFIs’ disbursement was also down by around Rs 600 crore.
“A lot of microfinance institutions put disbursement on hold because we need some clarity and it is currently quite ambiguous. We need clarity whether the institutions can collect Rs 500 or Rs 1000 notes from their borrowers as repayments of loans or not. We are not sure about it,” Gurugram-based Microfinance Institutions Network (MFIN) CEO Ratna Viswanathan told IANS on the phone.