The Microfinance Contagion Scenario

Harvard Business Review

In other words, at current repayments rates, any MFI with more than 12% of its portfolio in AP is at risk of insolvency. Indeed, the banks involved in rescheduling debt for Indian MFIs are demanding that the MFI management teams pledge all their existing equity and are refusing to make any new loans. Ad because microcredit loans are so short term, a fall of a few points in repayment rates can have major implications for the balance sheet, profitability and growth rate of MFIs.