Microfinance Focus, December 14, 2011: At the Microfinance India Summit a session ‘Evidence from the Field: Informing and Influencing’ discussed the findings of recent researches that studied the impact on the lives of the poor in Andhra Pradesh made by the unavailability of microfinance services over the last year.

Chris Murdoch from MicroSave presented a study “How are the poor managing their financial affairs post the AP MFI crisis? The findings of the research show an increased awareness amongst clients, approaching moneylenders, coping mechanism such as postponing expenditure and forgoing opportunities.

The study claims that MFI clients are willing to pay their outstanding loans if they get new loans. Majority of the clients denied being harassed by MFI staff and most clients borrowed beyond their credit requirements. The majority of clients accepted the fact that they swapped loans from different sources.

The research pointed out two faults. One is the lack of funds and the other is the long wait time to receive disbursement. It also claims that the inefficiencies of SHG forced clients to borrow from MFIs.

Other interesting findings of the study include the clients’ belief that the media along with SHG leaders and staff spread rumours of suicides. Also group responsibility is one of the major reasons for MFI loans to be disliked. Lastly, restoring credit discipline a major challenge for service providers in the coming years.

A study conducted by IFMR “Access to borrowing in Andhra Pradesh, Follow-up survey results” showed that clients now perceive more difficulty in attaining financing and have reduced expenditure. The report reveals that multiple borrowing decreased and most, unexpectedly, there has been a reduction in informal borrowing.

The 2009 data, ‘Access to Finance in Rural AP’ consists of 8 districts of 64 villages and 1920 households. The 2011 data, ‘Follow-up to Access to finance in rural AP’ consists of 2 out of the 8 previous districts and 146 households.

Dr Shamika Ravi, Assistant Professor, Indian School of Business while presenting the study “Evaluating in Context: Why an Innovation Anti-Poverty Program Showed no Net Impact”, said that microfinance does not address the extreme poor. The ultra poor strategy is based on ‘graduation’ from SHGs to JLG to individual loans.

From her research, it shows that the context is changing in the labor market, especially in the agricultural labor market because of NREGA.  Ultimately, she reveals that there are no long term statistically significant impacts of the program on income consumption. There is overall mixed result. While there are some evidence in health improvements, households have sold assets to pay significant amounts of outstanding loans and struggle to maintain a microenterprise despite stipend.

The only microfinance practitioner on the panel, Suresh Krishna, Managing Director of Grameen Koota concluded the discussion. “IFMR and MicroSave have done a good job post AP crisis. One message I take from here from both MicroSave and IFMR is that moneylenders are back. As microfinance is trying to institutionalize the credit flow, informal services are back. The poor clients in AP, who do not have money and cannot raise resources, are at a loss. I hope regulators and policy makers take note of this and provide better opportunities for AP and the rest of the country.”