Non-pay­ing JLG mem­bers dis­cour­ag­ing pay­ing mem­bers

Banking Frontiers - - Research Notes - Mfis -

It has been ob­served that while joint li­a­bil­ity group (JLG) guar­an­tee works well in case of tem­po­rary cash flow mis­matches, in events of pro­longed stress sit­u­a­tions with large num­ber of bor­row­ers un­der stress the mem­bers may not be able to honor the group guar­an­tee. Post-de­mon­e­ti­za­tion, ICRA vis­ited over 600 MFI cen­ters of 19 MFIs across 8 states cover­ing over 6,000 bor­row­ers. Weak­ened group link­age with bor­row­ers not honor­ing the joint li­a­bil­ity mech­a­nism in case of de­fault by fel­low group mem­bers was ob­served. In­stances of non-pay­ing group mem­bers dis­cour­ag­ing pay­ing mem­bers were also high­lighted by some field staff. Fur­ther, key driv­ers for delin­quent bor­row­ers to be­come reg­u­lar have been the need for fresh loans and re­jec­tions in credit bu­reaus. ICRA also no­ticed some lenders of­fer­ing top-up loans/ net­ting off delin­quent amount out­stand­ing and of­fer­ing fresh loans to cus­tomers in­di­cat­ing some ever-green­ing of loans.

MFIs/SFBs were able to make re­pay­ments to lenders as per sched­ule as most of them con­tin­ued to re­ceive in­cre­men­tal fund­ing from lenders. Fur­ther MFIs have pos­i­tive as­set li­a­bil­ity mis-match there­fore col­lec­tions re­ceived were suf­fi­cient to ser­vice their debt. MFIs and SFBs raised an ag­gre­gate of `47.13 bil­lion of eq­uity cap­i­tal in FY2017, of which `11.55 bil­lion was raised af­ter de­mon­e­ti­za­tion. Net worth in re­la­tion to man­aged ad­vances in­creased y/y from 16% to 25% as on March 31, 2017.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.