Growth Pangs of the Pandemic, Revisited

A stressful time for small finance banks & MFIs in India, but also an opportunity

Previous crises have demonstrated that financial service providers (FSPs) with financial strength can withstand the significant stress caused by COVID but it will take a well-crafted strategy that helps maintain the double bottom line – long term profitability of FSPs as well as the financial welfare of their borrowers – provided the microfinance sector as a whole makes a concerted effort. For this to happen, FSPs will need to deploy specialist loan restructuring skills that help to limit long-term loan losses while enabling borrowers to rebuild their economic lives.

Given the experience of previous crises in the microfinance sector in India, this Advisory Note sets out M-CRIL's expectation of a four-to-five-year adjustment and recovery period from the COVID crisis not just the two-year setback of demonetization.

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By Sanjay Sinha