What Are Clients Doing Post The AP MFI Crisis?
MicroSave's Policy Brief No. 5 examines the impact of the microfinance crisis on borrowers in Andhra Pradesh. It collates client experiences, opinions, and needs to help policy makers and key actors device solutions suited to client requirements. The study team conducted 76 sessions using participatory methods during July - August, 2011 in three regions of Andhra Pradesh. The team also interviewed government and bank officials with experience in SHG-bank linkage. Findings include:
- Most clients have been forced to return to or further expand their dependence on moneylenders;
- SHGs are too cumbersome and lend too little to sustain the financial requirements of households used to accessing relatively larger amounts of credit from MFIs;
- SHGs and daily finance corporations are the next most used source of credit after money lenders;
- Borrowers had to pay exorbitant interest rates charged by moneylenders and daily finance corporations;
- Several respondents had either postponed business expansion plans or reduced the scale of their business because access to credit had become difficult;
- Some respondents had sold their assets to meet their productive and essential non-productive expenditure.