Amid citizenship stir, MFIs look towards normalcy in Assam for repayment of loans

Violent protests rocked the state last week with agitators engaging in pitched battles with the police, forcing the administration to impose curfew in several places. (IE)

Microfinance institutions which have started witnessing delay in loan repayment in Assam following the outbreak of protests against the new citizenship law are keeping their fingers crossed for stability in their operations, industry insiders said. The micro-lenders are dealing with the current situation on its own by engaging themselves with clients, the state government and regulatory bodies and hoping that there will be “near normalcy” by the middle of this week.

“With imposition of curfew and a deteriorating law and order situation, we could not carry out our normal operations – conducting field visits, meeting customers, making collections, creating groups, and preparing them for disbursement of new loans. “Since Monday last week, activities have come to a standstill,” chairperson of MFIN, an industry association and a self-regulatory organisation, Manoj Nambiar told PTI.

With the All Assam Students’ Union (AASU) observing a three-day ‘Satyagraha’ this week protesting against the amended Citizenship Act, many microfinance institutions have been requested to stay away from normal activities during that period, he said. “From the industry point of view, there is delay in payment and I do not think anybody is going to default. We will work with customers in case of stressful situations so that they get more time to repay,” Nambiar said.

Violent protests rocked the state last week with agitators engaging in pitched battles with the police, forcing the administration to impose curfew in several places. “Normal operations have been impacted with internet services suspended in Assam. It is a tough situation at the ground level. From the industry point of view, we are in touch with the state government, our clients and we are not pursuing any forceful practice,” Satin Creditcare Network Chief Operating Officer Dev Verma said.

Satin has an exposure of about Rs 480 crore in Assam and the impact is “limited to four-five districts” from the company’s point of view, he said. For the overall microfinance sector, Assam portfolio was one of top 15 states in the country till September, he said.

Village Financial Services (VFS) Managing Director Kuldip Maity said, Assam is a “high potential market” for micro lenders with less penetration of organised financial institutions and the industry has started bearing the impact of “irregularity and delay” in terms of repayment after the state witnessed violent protests against the Citizenship (Amendment) Act.

“Collection has been hit adversely to some extent. Repayment rate which was almost 100 per cent in Assam has come down to about 70-80 per cent due to the agitation. The industry trend will be more or less similar to this,” he said. However, Maity said that the impact due to the stir in Assam will be “minimal” on the company as VFS has less than 5 per cent exposure in the northeastern state while its overall loan portfolio stands at about Rs 1,100 crore.

According to industry sources, close to 20 MFIs are working in Assam with a total customer base of 27 lakhs as on September, 2019. The exposure of microfinance institutions is around Rs 4,000 crore in Assam, and Rs 1,200 crore is due for repayment on a monthly basis, they said.

MFIs generally have weekly, fortnightly and monthly repayment schedule for their customers. “The delay in repayment is understandable as borrowers who take micro loans for their businesses are facing hardships amid this turmoil,” Maity said.

Nambiar, who is also Managing Director of Arohan Financial Services which has close to Rs 1,000 crore exposure in Assam, said things should come back to “near normalcy by middle of this week”. “The industry has been dealing with the situation in a natural way, rather than trying to bulldoze borrowers,” he added.