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

Mumbai: Microfinance institutions and non-bank 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 lifting of several restrictions. Though, the lockdown has been extended till May 17.

They have asked branch staff to engage with customers in need of low-ticket, top-up loans to push credit in rural areas and for the micro, medium and small enterprises.

Spandana Sphoorty, 79% of whose branches are in green zones, is operating 794 of its 1,006 branches after the Ministry of Home Affairs included MFIs and NBFCs under essential services. The micro-lender is also expecting the rest of its branches to open after the lockdown is lifted as it does not have any footprint in areas marked as red zones.

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

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

“We want all MFIs to interact with customers and zero in on their credit needs and encourage them to pay back loans,” he said, adding it has asked members to interact with district and police authorities so as to not face challenges when resuming operations. MFIN has also requested the Gujarat government — which has yet to comply with the MHA order on essential services — to allow MFIs to restart operations, Srivastava said.

MFIs, the last-mile connect for credit, are looking to restart collections as only 30-35% of their repayments happen through digital means. According to rating firm Icra, the cash shortfall of 29 MFIs, which account for 79% of the industry’s credit, is ₹2,600 crore.

Top-tier NBFCs with headquarters in red zones such as Mumbai, Pune and Delhi are also seeking special permission from authorities to allow critical administrative and back-end staff to resume work.