Extrapolating from the repayments that have been listed so far, the loans I have helped guarantee through UP all appear to be repaying on a cycle that will be several months longer than the 18 months listed. Is this widespread among UP loans? What is the cause and what is the impact on the borrowing entrepreneurs?
The repayments have been initially a little longer because of the time it took to raise funds and to send them to the bank to be used as guarantee. Those have been more or less sorted out.
Nevertheless the entrepreneurs continue to have 18 month loans as the MFI makes the loan to them.
That apart there has been a big drop in the availability of microloans to entrepreneurs. Currently the biggest challenge is getting banks to resuming lending to MFIs in India.Since the crisis erupted last year there has been very little bank lending to microfinance institutions in India. A lot of borrowers across India have not been getting new loans. In some cases some MFIs have come up with round about criteria to turn down borrowers without telling them directly that they cannot get loans. e.g. I heard that some MFIs are asking for post dated checks from borrowers to make new loans. But most borrowers have no bank accounts so the question of them giving post dated checks does not arise.
Recently a microfinance bill has been placed before the Indian Parliament. Till the bill is passed in Parliament, I do not foresee many banks stepping up to make loans to MFIs. The bill though not perfect has a lot of good features ( http://microfinance.cgap.org/2011/07/24/india%E2%80%99s-microfinanc...). Infact it even talks about mobilizing 'thrift' ( Savings) through MFIs.
I will have a post on this soon.