Top microfinance institutions (MFIs) are redrawing their business strategies to tackle the almost complete loss of business in Andhra Pradesh, the biggest market for MFIs in the country.

The fresh lending and collections in AP have come to a halt since October 2010, following the enactment of the MFI (Money lending) Regulation Act by the State Government.

The country's largest and only listed MFI, SKS Microfinance, is busy in various pilots outside Andhra Pradesh and studying State-wise potential and risk for expansion of operations.

“We are presently running gold loan pilots in Karnataka and Gujarat with an average ticket size of Rs 5,000. The ‘Sangam' stores (retail grocery stores with finance facility) are also being expanded,” a top functionary of SKS Microfinance told Business Line here.

Interestingly, SKS is the only MFI in AP which is applying for permission to disburse fresh loans as per the Act.

“Even though we have applied for over 73,000 fresh loans, the rate of approval from Government so far is only 2 per cent (due to restrictions on multiple lending). Going by this, our exposure to AP might even come to zero going forward,” he said.

Till October, SKS Micro had 25 per cent of its business in AP.

NON-SHG LENDING

There are also plans to skip lending to members of self-help groups (SHGs) to avoid coming under the ambit of the legislation.

“We do plan to focus on lending to non-SHGs,” Ms Padmaja Reddy, Managing Director, Spandana Spoorthy Innovative Financial Services, said.

At present, only 10-20 per cent of its clients are non-SHG members.

Bharatiya Samruddhi Finance Ltd (BSFL), the MFI arm of Mr Vijay Mahajan's Basix Group, has more innovation up its sleeves.

“Our objective is livelihood promotion. We are planning to lend to SHGs at group level so that they could in turn distribute loans to their needy members,” Mr Sajeev Viswanathan, CEO of BFSI, said.

When contacted, Mr Reddy Subrahmanyam, Principal Secretary, Rural Development, Government of AP, said any efforts at group-level lending to SHGs would be encouraged by the Government.

On the move by MFIs to distance themselves from over eight lakh SHGs, he said “there would be no loss.”

“In fact, we want this. They cannot make profit by lending to the poor. Let them lend to the rich and make profit and leave welfare of the poor to the Government,” he added.

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