With a drop of 26% in loans and a 16% decline in loan amount disbursed, the third quarter ending December 2016 would be the worst in performance for the microfinance industry in its history, said the industry self-regulator Microfinance Institutions Network (MFIN).
"The pulling out of the High-Value Currency Notes (HCVNs) from circulation significantly impacted the microfinance sector, which is 99 per cent cash-driven," said MFIN in a release in New Delhi. "The decrease on both disbursement and collection is due to the impact on industry post discontinuance of Rs500 and Rs1,000 notes," it added.[See full report here: http://mfinindia.org/wp-content/uploads/2016/10/Micrometer-Issue-20_Q3-FY-16-Feb-2017_public_16th-Feb-2017.pdf ] Following the demonetisation of Rs.1000 and Rs.500 notes with effect from midnight of 8th November, the industry was thrown out of gear, said MFIN Chief Executive Ratna Vishwanathan. "During the whole two months post discontinuing of High-Value Currency Notes, MFIN has had to engage with state governments, at both the ministerial level as well as the bureaucracy, the RBI and extensively with the press, to quell the surge of disinformation with reference to microfinance practices," she noted.
The loans disbursed in Q3 amounted to Rs.12,424 crore, compared to Rs.14,707 crore disbursed in Q3 in FY2015-16. "The fact of 80% to 85% collection during this period speaks of the value micro credit has in the lives of these borrowers. They are well aware of the importance of strong credit histories and have made the effort to pay back," said MFIN in its statement.
However, the microfinance industry grew by 53% year-on-year during the quarter, it said and 56% of disbursements came from five states — Karnataka, Tamil Nadu, Maharashtra, Odisha and Bihar.