Bigger Troubles for Indian Micro Credit…

More than six months after the Indian state government of Andhra Pradesh passed a law seeking to reform money-gouging microfinance institutions which had driven scores of the poor to suicide, the cure appears almost worse than the disease. Defaults are mounting for the micro-lenders in Andhra Pradesh, a state that produced as much as a quarter of India’s US$5.1 billion microfinance industry. The loan recovery rate has fallen to as low as 15 to 20 percent since the state pushed through the reforms. Many borrowers even with the best repayment history have started to walk away from their loans because of the lack of accountability. In the first half of the current fiscal year, microfinance loans nosedived from US$1.1 billion to as low as US$1.9 million.

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