Is Maharashtra the Next Andhra Pradesh for the Microfinance Industry?
Microfinance companies in Maharashtra are seeing early signs of trouble, reminiscent of a crisis that gripped the sector in 2010 when repayments came to a virtual standstill in Andhra Pradesh revealing poor lending practices by the industry.
While the situation is nowhere near as bad in Maharashtra, recent events suggest that excessive lending and political interference have once again resurfaced. The state accounts for 12 percent of the total microfinance portfolio in the country.
Concerns about excessive lending by microfinance institutions (MFIs) in some states, including Maharashtra, have been brewing for some time now but were brought into focus last week when two legislators raised the issue in the Maharashtra assembly.
Bharatiya Janata Party members – Milind Mane and Ashish Shelar – alleged that MFIs operating in the Vidarbha region in Maharashtra were indulging in coercive recovery practices and harassing women due to non-payment of dues. In response, the Maharashtra government told the legislative assembly that it will set up a Special Investigation Team (SIT) to look into the matter.