MicroSave Asks Clients in Andhra Pradesh: How Are You Coping without MFIs?

> Posted by Holly Padgett
Since I started working with the Center for Financial Inclusion this fall, I’ve been inspired to observe the client-centered nature of the microfinance industry.  For example, I recently read a report by MicroSave, an organization that focuses on market-led microfinance in Africa and Asia, which confirmed this client-centered trait. The report examines client experiences in the wake of the microfinance crisis in Andhra Pradesh.
Below are some of the findings of the report that I found most striking:

  • With MFIs in Andhra Pradesh drastically reducing new lending, borrowers have been forced to seek out alternative sources for lending. In 66 percent of the research sessions MicroSave conducted, clients described the major burden of these alternative loans as the “exorbitant” interest rates.
  • Ninety percent of the people interviewed said that they were actually willing to repay loans to MFIs during the crisis, on the condition that new loans would be distributed.
  • A majority of respondents said they preferred not to take loans directly from mainstream private and public sector banks due to “inordinate delays, cumbersome procedures, and the complex documentation requirements.”
  • While clients like the timely delivery and convenience of loans from MFIs, they disliked having to take on group responsibility and the lack of a grace period.

The study goes on to outline recommendations for MFIs, regulators, and state governments to adopt more stringent client protection policies.
It’s great to see that organizations like MicroSave are pulling important lessons from difficult events and making recommendations for progress in client protection. As a relative novice to the world of financial inclusion, this report leaves me both curious and optimistic about what the future holds for the industry.
Have you read?
Consequences of Over-Indebtedness: Lessons from India
On Microfinance: Who’s to Blame for the Crisis in Andhra Pradesh?
The Lessons of Andhra Pradesh