Microfinance and Self-Help Groups in India
The Andhra Pradesh Microfinance Crisis
In 2010, over-lending, aggressive collection and political action caused repayments to collapse in Andhra Pradesh, changing Indian microfinance.
A famous crisis reshaped the sector.
The boom
Microfinance companies expanded rapidly in Andhra Pradesh, lending to the same households repeatedly.
The stress
Reports of borrower distress and harsh recovery made headlines.
The ordinance
The state government passed a law restricting recovery, and repayments fell sharply.
Aftermath
The RBI tightened regulation, and the industry adopted more caution.
A borrower with many loans
A woman takes new loans to repay old ones, and the burden compounds.
Assuming growth is always good
Speed can cause risk.
Key takeaways
- Rapid lending led to over-indebtedness.
- State action collapsed repayments.
- RBI tightened rules.
- Caution followed.
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