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The Microfinance Contagion Scenario

Harvard Business Review

The average debt-to-equity ratio of the 10 largest MFIs in India is 7.06 , indicating an average 12% equity cushion. In other words, at current repayments rates, any MFI with more than 12% of its portfolio in AP is at risk of insolvency. Losses in AP will overwhelm many institutions' equity cushion. That could likely have consequences.