India Microfinance Body: Sector Facing Survival Threat

Friday, December 3, 2010

MUMBAI -(Dow Jones)- India’s microfinance sector could be all but wiped out if immediate steps aren’t taken to rescue it, after authorities in the southern state of Andhra Pradesh initiated steps to tighten its grip over their lending activities, the president of a local representative body said Friday.

“By Dec. 31, if this situation continues, there will be no microfinance sector in 2011,” Vijay Mahajan of Microfinance Institution Network, or MFIN, told reporters on the sidelines of a banking conference here. MFIN has a total of 44 member companies and account for approximately 80% of the microfinance lending in India.

Microfinance institutions, or MFIs, borrow from banks and usually lend less than $200 to the poor who use the money to start or expand small businesses. They have been criticized for allegedly following the practice of unregulated money lenders, who charge high interest rates, use illegal collection practices and often push the borrower into a debt trap.

Source: Dow Jones (link opens in a new window)