Rural Customers Will Bounce Back Faster: MFIs

Rural borrowers will recover faster from the national lockdown while those in urban areas could take more time to bounce back, believe microfinance institutions.

At a webinar organised by Sa-Dhan on Monday, MFIs were also of the view that the three-month moratorium on loan repayments should be extended as borrowers could take some time to resume their livelihood, given that the lockdown has been extended till May 17.

“The condition is serious at ground level more, so in the case of urban areas where there have been job losses….the situation in rural areas is better,” said Mukul Jaiswal, Managing Director, Cashpor Micro Credit.

Venkatesh N, Managing Director, Samasta Microfinance, also said the situation is “murkier” in urbanised parts of States, while it is more favourable in rural areas.

“Extension of the moratorium till June 30 will be more helpful as the lockdown will be lifted by May 17 and it will take time for people to get back to their livelihood,” Venkatesh noted.

The three-month moratorium by the Reserve Bank of India on all term loans is for instalments due between March 1 and May 31, 2020.

Manoj Sharma, Managing Director – Asia, MicroSave, agreed and said that a moratorium of another three months may be more helpful.

He noted that not all enterprises have been impacted and many corner stores and kirana shops have been doing well even during the lockdown.

A large part of the borrowers of MFIs have taken the moratorium but many have shown willingness to start repayments.

When asked about the impact of migrant labour returning home, Jaiswal said it will have to be seen. “There will be an impact in the immediate future. The household income of such customers will also come down. We will have to wait and watch how it plays out,” he said.

Both Cashpor and Samasta MF said they have sufficient liquidity till June end and are waiting to see the impact of the recent measures by the RBI, including TLTRO and financing through SIDBI and NABARD.

The MFIs, too, have been able to get moratorium from at least some of their own lenders, they said.

“RBI intervention has been helpful but there is need for more push,” said Venkatesh.

The webinar discussed the theme, Surviving and Reviving: Strategies for MFIs in post lockdown Scenario. The players noted that they would have to bring about changes on resumption of normal operations and explore ways for cashless collection, changed measures for lending and also look at significant investments in technology.