Microfinance institutions began as financial services providers to low-income groups which traditionally lacked access to mainstream banks. Photo: Raju V.
Most MFIs typically started as NGOs or not-for-profit institutions, who gave assistance to the poor, mostly in the rural areas, who wish to generate income through self-employment. Photo: M. Karunakaran
MFIs, whose capital came from banks, slowly entered the money market. Some of them went on to become profitable institutions. Picture shows Vikram Akula, Founder and CEO, SKS Microfinance, the first MFI to issue an Initial Public Offer. Photo: D. Ravinder Reddy
For the want of profits MFIs started charging high interest rates. Some even resorted to physical coercion to recover loans. This made these institutions no better than money-lenders. MFIs began to lose their sheen. Picture shows activists from the All India Democratic Women's Association activists protesting against MFIs in Visakhapatnam. Photo: C.V.Subrahmanyam
Harassed by microfinance institutions in the name of loan recovery, customers took to the streets demanding government intervention to control unethical practices. Picture shows one such demonstration in Visakhapatnam. Photo: C.V. Subrahmanyam
There were reports of suicides, allegedly due to extreme harassment by loan recovery officials from MFIs. A family mourns one such death reported from Rolakal village, Nalgonda, Andhra Pradesh last October. Photo: Singam Venkata Ramana
Political parties came out in support of the victims and demanded action against MFIs, particularly in Andhra Pradesh, which saw a spate of suicides. Photo: U. Subramanyam
Andhra Pradesh proclaimed the "MicroFinance Institutions (regulation of money lending) Ordinance" to rein in MFIs in the State. A registering authority will monitor the functioning of MFIs and it is mandatory for them to register and inform the authority its area of functioning, interest rates and recovery methods. Photo: P.V. Sivakumar
Although strict implementation of the ordinance came as a relief to customers, MFIs claimed that they suffer losses due to slow recovery and reluctance by banks to support them. Picture shows the top-brass of Microfinance Institutions Network at a press conference in Hyderabad. Photo: P.V. Sivakumar
Aimed at reviving the crisis-ridden sector, the RBI constituted a committee headed by its Central Board Director Y.H. Malegam (in the photo). In its recommendations, the panel suggested a maximum interest of 24 per cent on loans that do not exceed Rs. 25, 000. It also barred multiple lending by individuals and SHGs. Most MFIs accepted these recommendations. Photo: K.V. Srinivasan
At an annual summit of MFIs in New Delhi, the Chairman of the Economic Advisory Council to the Prime Minister, C. Rangarajan, called for self-regulation in the sector along with a regulatory mechanism. His insights could probably bring back the lost reputation to these institutions. Photo: Ramesh Sharma