A cash crunch in Asia’s third-largest economy is increasingly becoming a challenge for microfinance firms. The Narendra Modi government’s recent ban on Rs500 and Rs1,000 currency notes to deal with tax evasion and counterfeiting has suddenly limited money supply in the economy. Indians are rushing to banks and post offices to get their now-illegal notes exchanged before the Dec. 30 deadline.
For microfinance firms, which lend to the poor and marginalised, there’s also the risk that repayments could be delayed, a Nov. 17 report(paywall) by India Ratings and Research says. The credit rating agency has warned that if the money supply isn’t balanced by March 2017, these firms could find themselves in jeopardy. They typically deal in small sums of loans, disbursed and repaid in cash.
For more on this story visit the following link: India’s demonetisation plan is hurting micro-finance firms that lend to its poor