July 16

India’s Microfinance Sector Hit As Defaults Surge In Pandemic

Small loan specialists in India that typically cater to people without bank accounts are facing a jump in pandemic-related defaults that could force some of them out of business, industry experts warn.

Loans overdue by 30 days are expected to reach 14-16% of all so-called microfinance loans in the immediate aftermath of the second COVID-19 wave sweeping India, said Krishnan Sitaraman, senior director at credit rating agency CRISIL.

That’s higher than 6-7% in March, before the second wave took hold, and also above the 11.7% reached in March 2017 after India’s demonetisation drive – an attempt to boost digital transactions and crack down on undeclared money that also hit microfinance lenders hard.

Photo courtesy of Peter Haden.

Source: Reuters (link opens in a new window)

digital payments, microfinance