MFIs, NBFCs to resume full operation in green and orange zones

Mumbai: Microfinance non-financial institutions and lenders are set to resume full-fledged operations in green and orange zones or areas designated as safe from the Covid-19 virus outbreak after the government announced the lifting of several restrictions. However, the lockout has been extended until May 17.

They have asked the branch to partner with customers in need of low-cost mortgage loans to push credit in rural areas and to micro, medium and small businesses.

Spandana Sphoorty, 79% of whose branches are in green zones, operates 794 of its 1,006 branches after Ministry of the Interior included MFIs and NBFCs during important services. The micro lender also expects the rest of its branches to open when the lock is lifted, as it has no footprint in areas marked as red zones.

Arohan Financial Services also operates more than 40% of its branches, with more to follow as the lockdown lifts.

“Our member MFIs open as many branches (as possible) in the green zones and prepare to scale in the orange zones depending on additional directions from the MHA,” said Harsh Srivastava, CEO of the industry organization Microfinance Institutions Network (MFIN) .

“We want all MFIs to interact with customers and reset their credit needs and encourage them to repay loans,” he said, adding that it has asked members to interact with district and police authorities not to meet challenges as they resume surgery. The MFIN has also requested the Gujarat government – which has not yet complied with the MHA order for essential services – to allow MFIs to restart the operations, Srivastava said.

MFIs, the last mile connection to credit, are looking to restart the collections as only 30-35% of their repayments are made through digital means. According to the valuation company ICRA, the cash deficit of 29 MFIs, accounting for 79% of the industry’s credit, is ¼ 2,600 crore.

NBFCs headquartered in red zones like Mumbai, Pune and Delhi are also seeking special permission from the authorities to allow critical administrative and back-end staff to resume work.

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