Non-paying JLG members discouraging paying members
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.