October 8

Microlenders in India See Light at End of Tunnel; Collection Rates Inch Back To Pre-COVID Levels

By Dinesh Unnikrishnan

After taking a severe hit during the COVID-19 lockdown, India’s microfinance industry is slowly limping back to normal operations.  Microfinance institutions (MFIs) are in the business of giving small loans to low-income borrowers, typically farmers or small entrepreneurs. These companies source money from banks at 10-15 percent and onlend to their borrowers at 20-23 percent.

With COVID-19 onslaught forcing a nationwide lockdown starting the last week of March this year, the collection rates had fallen to a trickle as MFIs collect money from borrowers mostly in cash. The risk of infections and the rules stipulated by the government made the collection process nearly impossible. The situation continued for many months.

Photo courtesy of Peter Haden.

Source: Money Control (link opens in a new window)

Coronavirus, Finance