With the microfinance industry in crisis in Andhra Pradesh, MIX looks to explain the potential impacts of capping profits and interest rates for MFIs in India. To do this, MIX examined MIX Market historical data in order to simulate where the industry would be if the caps had been in place. Using data from over 100 MFIs in India from 2003 to present, MIX explored the hypothetical results of limiting interest rates to 24 percent and profits at 3 percent. To understand the impact of these limits, MIX tracked three basic metrics: total loans outstanding, capital/asset ratios, and returns on assets across the scenarios.
Mix Report Microfinance Crisis Andhra Pradesh, India
The result of the simulations showed a loss of over 10 million loans, forced shut down of several instructions due to inadequate equity (often small or young institutions), higher leverage ratios, and lower returns. To get an in-depth look at how different the Indian microfinance market would have been, Read more here