Independent Report on Mass Default against MFIs in Karnataka, India

The Association of Karnataka Microfinance Institutions (AKMI) has released Competition & Role of External Agents, an independent report on microfinance in the state of Karnataka, India. The study was commissioned by EDA Rural Systems and CGAP. Probing the 2009 delinquency crisis in the microfinance sector in Southern Karnataka, the report highlights key issues which led to mass defaults by microfinance clients and recommends measures to MFIs to prevent such a situation from occurring again.

The report draws attention to the aggressive growth of MFIs in terms of outreach, which has caused the dilution of processes and disciplines in customer outreach. This resulted in the proliferation of agents in sourcing customers and in some cases phantom customers were used by fraudulent agents, which triggered the crisis in the Kolar district.

*The current report excludes client survey data which is not yet ready.

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The Indian Microfinance Impasse

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