Small MFIs seek financial package from Centre to tide over COVID-19 crisis

Kolkata, Apr 28 () Hit by the ongoing coronavirustriggered lockdown, small microfinance institutions havewritten to Union Finance Minister Nirmala Sitharaman seeking afinancial package for them to tide over the crisis, anofficial said on Tuesday.

Small micro lenders sought fund from the Centre tomeet their operational expenses and requested it to advisetheir lenders --banks and development finance institutions--toconvert their outstanding loans into equity or long termadvances with reduced interest rates.

"Around 96 small MFIs with an asset size of less thanRs 200 crores have a total loan portfolio of Rs 5,332 crores.They have a client base of 25 lakhs but are struggling to meettheir operational expenses. Their capital is getting erodedwith no collection during the lockdown," said P Satish,executive director of Sa-Dhan, a self-regulatory organizationof the industry.

This is also affecting their borrowing ability, hesaid.

Small MFIs have extended the three-month repaymentmoratorium benefits to their borrowers in the wake of thelockdown, and are expecting the same from their lenders.

"All our lenders and banks /FIs may be advised toconvert their outstanding loans into equity with 5 years oflock in period and additionally to provide loans for furtherlending.

Alternatively, these could also be converted to longterm loans of 5-7 years with reduced interest rates," theletter sent by 33 small MFIs to the minister read.

These entities also said the lockdown "has impactedthe micro businesses of the informal sector" supported throughtheir lending.

"Due to stoppage of businesses and erosion of savingsof our borrowers, repayments will be hugely affected," thesmall MFIs pointed out. BDCNN NN