Questions abound on Kolar delinquency incident at Microfinance India Summit 2009

Microfinance Focus, Oct. 25, 2009: What spurred Kolar’s large-scale delinquency? The question dominated the evening session of Microfinance India Summit being held in New Delhi on Monday.

The day began with a pomphlet distributed by Ramesh Bellamkonda, Managing Director of BSS Microfinance Pvt. Ltd., which has pointed out that the delinquency problem in Karnataka was triggered by  religious considerations and urged immediate attention of the microfinance community and regulators. Apparently, the local religious leaders have issued a decree instructing the community borrowers not to repay loans to microfinance institutions citing religious norms against interest collection or payment.

While a delegate referred to AKMI (Association of Karnataka Microfinance Institutions) report, others wondered whether it should be examined more in-depth to find out the root cuase. It may be recalled that the defiance in Kolar has spread to four other districts in Karnataka including Mysore, Ramanagaram, Chikkaballapur and Tumkur.

More than ten from the audience raised the issue and the discussion was eventually stretched from high interest rates to multi-lending. One delegate has suggested to introduce Islamic Microfinance product to deal with such developments.  Another sought to know if it is possible for MFIs to collect money without any sort of force.

Another suggestion was to provide incentives to borrowers to repay loans.

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