Will Acche Din come for the borrowers of Micro Finance Institutions in Assam now?
In the modern context, microfinance is also known as microcredit and microlending, the concept basically arrived from our neighbouring country.
As Dr. Himanta Biswa Sarma has become the new CM of Assam, will he keep the major promise he made during the assembly election campaign?
As the Microfinance Institutions are in deep pain for the rising number of Non-Performing Assets due to the present pandemic situation as well as for the major political statements made by all political parties during the election campaign for waiving off the loans borrowed by the individuals of Assam.
In the modern context, microfinance is also known as microcredit and microlending, the concept basically arrived from our neighbouring country Bangladesh with the Grameen Bank Model of Mohammad Yunus, also known as “banker for the poor”. Mohammad Yunus has won the Nobel Peace Prize in 2006 for his excellence in providing small loans for short tenure to the poor and encourage them to set up their own business. And then the concept has been adopted by several nations across the world now.
According to the rating agency CRISIL, Assam’s Microfinance portfolio (Including banks and non-banks) was estimated at Rs 12,400 crore in September 2020 or about 5% of the all-India portfolio in the sector. Assam is one of the key state for microfinance lending among entire northeastern states. There are 45 NBFC-MFIs in Assam with 27 lakh borrowers, apart from seven small finance banks and seven scheduled commercial banks operating.
Earlier December 2020, the Assam state assembly has passed the Assam Microfinance Bill, aiming it as a tool to prevent the exploitation of borrowers by lenders. The law also seeks to extend the RBI guidelines to all MFIs operating in Assam. Under RBI rules microlenders cannot offer loans beyond Rs 1.25 Lakh per borrower. However these limits can be relaxed if the loan amount is meant for education and medical expenses, the major rule has provisioned a bar on borrowers to approach for more than two MFIs at a time.
These all sudden decisions have created a strong mindset among the borrowers not to pay their dues or instalments as they are in anticipation of getting relaxation by the government by avoiding the fact that their credit scores will get down.
In several parts of Assam since the past few months, the recovery officers are being attacked by the borrowers, some even lost their lives, but no political or sympathetical statements have been made by any ruling or opposition parties. The microlenders have faced a massive hit on last year’s post lockdown phase, where more than 50% of the micro borrowers failed to repay their loans even after availing moratorium period. And now again these partial lockdowns in Assam has created the same scenario.
Whatever the decision the govt takes, the rumours of microfinance loan waivers in the run-up to state assembly elections have significantly damaged the customer discipline in repayment of the loan, which can damage the long term prospects of microfinance in India as well as Assam.
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