The microfinance sector in the country has shrunk by about 40 per cent exactly a year after the crisis began to unfold in Andhra Pradesh.
While the drop in portfolios and operations are quite discernible in major microfinance institutions (MFIs), many smaller ones are on the verge of disappearing, according to industry sources.
SKS Microfinance Ltd's gross loan portfolio decreased from Rs 5,434 crore in September 2010 to Rs 3,450 crore as on June 30, 2011. It also posted Rs 219-crore loss due to losses in Andhra Pradesh.
Analysts expect SKS to announce further write-offs in its Andhra Pradesh portfolio in the second quarter ended September 30, 2011.
Spandana Sphoorty Financial Ltd's portfolio has come down from Rs 4,200 crore last year to Rs 2,200 crore now.
“We have lost business portfolio and assets which have been built carefully for over a decade, in the last one year,'' Ms Padmaja Reddy, Managing Director, Spandana, said.
The complete halt of fresh disbursals in the State (which accounted for 30 per cent of the Rs 33,000-crore portfolio last year), led to a dip in business significantly. Lack of recoveries of old loans in the State and hesitation among banks to lend to MFIs adversely impacted growth in other States.
Dip in employment
There was a corresponding decline in employment provided by MFIs as well, pointed out Mr P. Kishore Kumar, Chief Executive Officer, Trident Microfin.
The estimated employees in September 2010 were two lakhs. “Out of this, 50,000 were in Andhra Pradesh and most of them have no jobs now. With no expansion, the usual hiring also did not take place in other regions,'' Mr Kumar added.
In a recent interaction, Mr Vijay Mahajan, President of Microfinance Institutions Network and Chairman of Basix Group, told Business Line that the draft microfinance regulation of the Government of India may not become a reality before the next financial year.
The MFIs may, therefore, have to live longer with uncertainty in Andhra Pradesh.