Demonetisation hits micro-finance biz

Demonetisation took a heavy toll on cash driven micro-finance industry as both the number of loans given and amount disbursed fell significantly in the December quarter, says a report.
According to the report by Microfinance Institutions Network (MFIN), there was a decline of 26 per cent in the number of loans disbursed and 16 per cent fall in loan amounts given in the October-December quarter of the current fiscal.
"The decrease in both disbursement and collection is due to the impact on industry post discontinuance of the High Value Currency Notes (HCVNs) of Rs 500 and Rs 1,000," said the MFIN report.

The pulling out of the currency from circulation significantly impacted the microfinance sector which is 99 per cent cash driven, it said.
"Post the discontinuation of HCVNs with effect from midnight of November 8, the industry was thrown out of gear initially. This was to be expected in a sector which is 99 per cent cash intensive and has a unique doorstep delivery model specifically for the unbanked and underbanked," said Ratna Vishwanathan, CEO, MFIN.
She further said that during November and December, MFIN has had to engage with state governments at 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.

The report further said the aggregate gross loan portfolio of microfinance institutions stood at Rs 56,634 crore in the third quarter of 2016-17 as compared to Rs 36,912 crore in the similar period last fiscal, an increase of 53 per cent.
Over half of the total disbursements during the quarter came from five states - Karnataka, Tamil Nadu, Maharashtra, Odisha and Bihar.