The systemic level at which change can be quantified or qualified implying causality. This category investigates the effects of programmatic activity on specified client populations.
Should We Be Concerned? Microfinance in India Growing Fast Again: Having largely recovered from the crisis, the growth of microfinance today creates a new set of challenges.
The findings of the recently released Inclusive Finance India Report suggest that these challenges should be addressed soon. Sanjoy Ghosh, CGAP Photo Contest Growth of debt is concentrated in a few client segments There is a consensus based on interviews conducted for the report that the growth of microfinance is aggressive, putting strain on the credit officers.
The data on regulated microfinance institutions MFIs that submitted their numbers to the Microfinance Institutions Network indicates that over the past year, loan portfolios grew by 84 percent and loan disbursements grew 45 percent.
In comparison, consider these numbers: This means more debt within the same client segments, leading to overleveraging, which could end up in a large-scale default.
The typical employee at one of these providers is possibly managing more clients with larger loans, which leads to a larger concern about the quality of the growing portfolio.
How could these challenges play out? Compared tothere are better customer protection measures in place: Also, the MFIs report loans to credit bureaus and use credit reports in disbursement decisions. These include areas with limited credit off-take, little urbanisation, thin diversification in non-farm activities, and no robust banking system.
As the figures above show, India is seeing a concentration of loan portfolios across a modestly expanding branch network and rising loan amounts. All of this suggests some serious pockets of concentration risks for MFIs. The data point to three possible scenarios: Stress in a given MFI because of excessive growth.
If large defaults are in a single MFI, the contagion could be managed. If the MFI is systemically important and its products are difficult to differentiate, then the problem might spread to other MFIs. Stress in isolated geographies.
Inthere were isolated incidents of default and stress in Kolar, Krishna and Nizamabad districts. They were brought under control, but they were precursors of the crisis. Any instance of regionally focused stress events should ring alarm bells.
Stress in a geographical area spreads with a domino effect. Uttar Pradesh province, which is seeing aggressive growth and anecdotal reports of stress, will have elections soon. Any stress-induced crisis there would likely have wider consequences. For instance, Bengaluru district has the highest portfolio, but as it subsumes the large city of Bengaluru, there are opportunities to lend for diversified livelihoods.
Stress represents the ability to cope and changes contextually. A paper issued by Microfinance Institutions Network flagged issues that are causing stress: Interestingly, these reports do not match the list of districts that have the largest MFI exposure, suggesting that concentration may be in areas with greater capacity to absorb debt.
For example, the district of Azamgarh in Uttar Pradesh was featured as a debt stress area in news articles but does not feature in the top districts in terms of concentration. However, the district has reported incidents that are flagged by the Microfinance Institutions Network.
These anecdotal incidents, plus instances such as suicides or attempted suicides due to indebtedness and coercive recovery practices, obstruction by ring leaders, mass default, or the closure of branches by government officials, could snowball into a crisis.
A crisis could be averted if the MFI sector investigates such instances and takes measures to prevent them from spreading. MFIs, in particular, should be concerned about reputational risk. For instance, the data in the Inclusive Finance India Report is only from regulated MFIs; however, self-help group programs exist alongside providers regulated by the state law co-ops, nidhis, chitfunds.
Some providers pretend to be mainstream but are unincorporated. Any negative news about them is also going to affect the regulated MFIs, so it is important for regulated MFIs to demonstrate superior practices that differentiate themselves from the others.
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The Department of Social Services’ support of the annual National NILS Conference facilitates the sharing of knowledge and best. Microfinance and Its Discontents: Women in Debt in Bangladesh [Lamia Karim] on regardbouddhiste.com *FREE* shipping on qualifying offers.
In the Grameen Bank of Bangladesh won the Nobel Peace Prize for its innovative microfinancing operations. This path-breaking study of gender. We support Europe’s SMEs by improving their access to finance through a wide range of selected financial intermediaries.
To this end, we design, promote and implement equity and debt financial instruments which specifically target SMEs. This Microcredit and Microfinance Glossary has been compiled from different sources. While efforts have been made to include as many relevant terms as possible, there may be a few missing.