How “M” for money hit the “M” for Micro-finance industry?

On 8th November 2016, when Narender Modi made that storming announcement, we all were sitting, confused. Suddenly the phone started ringing and all our customers were in same situation.

This complete change brought along a real tough time to each one of us. Bankers were the real heroes, but no one noticed us. Most of the people in our industry were seen working for 15-16 hours a day. We suddenly had a longing for ours beds.

The difficult part was making our target audience (mostly uneducated), understand how we were different from banks and why we could not accept the old currency.

Despite all this, a major hit is still seen across nation. Its been more than a month and we are still struggling with our monthly recovery cycle.

How hard demonetization is for us?

Well yes, honestly, it can be the strongest earthquake till now for us.

  1. Our PAR (Principal At Risk) is phenomenally high now. Customers here are of two types, one where customers have a good reason to default and others who have been paid salary in old denominations only. Such customers do not have the time to exchange those notes as one day off will result in loss of pay, LOP as you all say.
  2. Credit rating for our customers will also decline. Despite 60 days extension by RBI this will  result in high Credit Bureau rejection cases.
  3. Sales has been reduced to numbers or completely stopped for certain period. Hence our customers will again fall in trap of money lenders who charge heavy deposit. Revival of such customers will be a difficult and long process.
  4.  Most of customers either want loan waiver or one month extension. Waiving off loan will also waive us off.

Demonetization is a phase like a meteor rain. It can only be seen once in a lifetime. The sparkling change may seem beautiful in long run, but beneath it, there will be hard hit financially excluded portion of society.

Question stays now, How things will fall in place? For us, all of us!


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