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Micro-Finance Faces Setback Post Demonetisation
January 13, 2017
After the scrapping of the old Rs.500 and Rs. 1,000 notes by the government, micro-finance institutions are facing a tough time owing to tremendously slowed down recovery rate of loans that have already been disbursed.
The primary reason behind this slowed recovery is reduced collection efficiency due to the limited cash supply in the economy. Since micro-finance credit recoveries are mostly in the form of cash, unavailability of adequate cash in the country has hit MFI severely. Also, the time taken by the economy to get back to the normal situation is longer in rural areas, which are the key areas of operation for MFI.
Meanwhile, RBI has negated rumours of loan waivers to micro-finance borrowers.
