Citizenship Act Protests Impact Microfinance Business In Assam
Activists of All Assam Students Union, along with members of different organizations, during their ‘Satyagraha’ protest demanding withdrawal of Citizenship (Amendment) Act, 2019, in Guwahati, on Dec. 17, 2019. (Photo: PTI)

Citizenship Act Protests Impact Microfinance Business In Assam


The protests in Assam against India’s reworked citizenship law has brought business of microfinance firms to a standstill.

These lenders are dealing with the current situation on their own by engaging with the clients, the state government and regulatory bodies, and are hoping that there will be “near normalcy” by the middle of this week.

"With imposition of curfew and a deteriorating law and order situation, we could not carry out our normal operations—conducting field visits, meeting customers, making collections, creating groups, and preparing them for disbursement of new loans,” Manoj Nambiar, chairperson of industry body MicroFinance Institutions Network, told Press Trust of India. “Since Monday last week, activities have come to a standstill.”

With the All Assam Students' Union observing a three-day 'Satyagraha' protest against the Citizenship (Amendment) Act, 2019, many microfinance institutions have been requested to stay away from normal activities during that period, he said.

"From an industry point of view, there is delay in payment, and I do not think anybody is going to default. We will work with customers in case of stressful situations so that they get more time to repay," Nambiar said.

Violent protests flared in Assam last week with agitators engaging in pitched battles with the police, forcing the administration to impose curfew in several places.

"Normal operations have been impacted with internet services suspended in Assam. It is a tough situation at the ground level,” Dev Verma, chief operating officer at Satin Creditcare Network Ltd., said. “From an industry point of view, we are in touch with the state government, our clients and we are not pursuing any forceful practice.”

Satin Creditcare has an exposure of about Rs 480 crore in Assam and the impact is "limited to 4-5 districts" from the company's point of view, Verma said. For the overall microfinance sector, Assam was one of top 15 states in the country till September, he said.

According to Kuldip Maity, managing director of Village Financial Services, Assam is a "high potential market" for microfinance firms with less penetration of organised financial institutions. The industry has started bearing the impact of "irregularity and delay" in terms of repayment after the state witnessed the violent protests.

"Collection has been hit adversely to some extent. Repayment rate, which was almost 100 percent in Assam, has come down to about 70-80 percent due to the agitation. The industry trend will be more or less similar to this," he said.

However, Maity said that the impact due to the stir in Assam will be "minimal" on the company as it has less than 5 percent exposure in the northeastern state while its overall loan portfolio stands at about Rs 1,100 crore.

According to industry sources, close to 20 microfinance institutions are working in Assam with a total customer base of 27 lakh as of September 2019. The exposure of microfinance institutions is around Rs 4,000 crore in Assam, and Rs 1,200 crore is due for repayment on a monthly basis, they said.

Micro lenders generally have weekly, fortnightly and monthly repayment schedule for their customers. "The delay in repayment is understandable as borrowers who take micro loans for their businesses are facing hardships amid this turmoil," Maity said.

MFIN’s Nambiar, who is also managing director of Arohan Financial Services, said that things should come back to "near normalcy by middle of this week". "The industry has been dealing with the situation in a natural way, rather than trying to bulldoze borrowers.”

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