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Dave Spart

Bbc: Why India's Small Loans Industry Is In Crisis

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By Soutik Biswas

BBC News, Andhra Pradesh

About a year ago, says Vijay Mahajan, he predicted that India's roaring private micro-finance industry would hit the buffers.

As the head of a network of private micro-finance companies, Mr Mahajan has seen the industry pick up at a frenzied pace, giving away $7bn in loans to 30 million households.

The southern state of Andhra Pradesh accounted for a third of these households and nearly half of the loans.

Nothing wrong in that: small loans to the poor who do not qualify for traditional banking credit help lift them out of poverty and spur entrepreneurship.

But Mr Mahajan says he was worried by the reckless lending and feckless borrowing by micro-credit companies and villagers respectively.

This has now led to borrowers defaulting on payments and taking their lives and banks ceasing to lend to the cash-strapped micro-loan companies.

At the root of it, many say, is the increasing greed of the private micro-finance industry in India.

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  • 312 Brexit, House prices and Summer 2020

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