SKS scrip dips over MFI crisis in AP
Mumbai, Nov. 16: India’s microfinance sector has come a long way in the past three months. In August this year, microfinance institutions (MFIs) were being touted as a magic bullet that could deal with development, financial inclusion and women’s empowerment while being wonderful for investors as well. Right now, in public perception at least, the sector is most closely identified with loan sharks. Perhaps nothing mirrors the journey more accurately than the stock price of SKS Microfinance. On Tuesday, the stock plummeted by over `100 to close at `799.25 — the lowest ever. The intra-day low for the stock was `738.55 — that’s less than half of the peak that the share had seen near end of September.
Multiple factors are being blamed for the day’s fall. In an interview to a news organisation, Mr Vijay Mahajan, head of Microfinance Institutions Network, said that lenders are seeking `1,000 crore to set up an emergency ‘liquidity fund’. There was a report on Monday that the central government is also contemplating a single regulator for the sector. The sector has been in dire straits ever since the Andhra Pradesh government passed an ordinance last month. This ordinance banned MFIs from lending or recovering their dues from their customers until they were registered with District Rural Development Authority (DRDA) in each district. The ordinance had come after several suicides were blamed on strong arm tactics of these firms. The industry says that the process for registration had little clarity about procedures, which means they can’t get registered.
Later on, the government directed MFIs to collect installments on monthly basis as against weekly. MFIs argue that the poor families can’t save money for one month.
An MFI operating in north India says that their operations are going on normally. However, AP is the single largest market for MFIs and problems here spell trouble for the sector.
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