Voice of People on the Lending Practices of Microfinance Institutions in Krishna Districts of Andhra Pradesh
This study examines MFI lending practices in the Krishna and Guntur districts of Andhra Pradesh, India. It focuses on the rates of interest and repayment, as well as the delinquency management methods followed by MFIs and their implications on members. The study covers 130 self-help group MFI members from 12 villages in each district.
The study provides an insight into the problems borrowers face from lending institutions. In response to the growing number of complaints against MFI practices in these districts, MFIs have decided to adopt a model code of lending practices to bring transparency to their operations, end overcharging and observe if policy benefits are passed on to borrowers. Study findings indicate that:
- MFI borrowers found It difficult to adhere to strict repayment systems;
- Insistence on strict repayment drove them to money-lenders;
- Penalties imposed on borrowers delayed attendance, detained other group members and added to the cost of borrowing.
Further, the study found that multiple MFI-bank borrowing led to common borrowers defaulting on bank loans, while paying back stringent MFI loans. These issues need to be addressed by mutual cooperation and information sharing among MFIs.
