Myths and reality of microfinance

The size of loans and tenure of repayment can be increased. MFIs should also be allowed to give secured micro loans, depending on the end use and quantum, if we want to change the poverty landscape

A few traditional investors in microfinance companies in India seem to be a disappointed lot these days. They say there’s too much hype about how micro loans change people’s lives but the ground reality is very different.

The investors make money for a few years and then lose it over the next few years for reasons ranging from political interference to loan waivers during state elections, natural calamities and now also because of the once-in-a-century pandemic, Covid-19.

They are curious to know how micro loans have helped in poverty alleviation. Yes, poor people’s dependence on informal financing has reduced but not fully