Hit by the ongoing coronavirus
triggered lockdown, small microfinance institutions have written to Union Finance Minister Nirmala Sitharaman seeking a financial package for them to tide over the crisis, an official said on Tuesday.
Small micro lenders sought fund from the Centre to meet their operational expenses and requested it to advise their lenders --banks and development finance institutions--to convert their outstanding loans into equity or long term advances with reduced interest rates.
"Around 96 small MFIs with an asset size of less than Rs 200 crores have a total loan portfolio of Rs 5,332 crores. They have a client base of 25 lakhs but are struggling to meet their operational expenses. Their capital is getting eroded with no collection during the lockdown," said P Satish, executive director of Sa-Dhan, a self-regulatory organization of the industry.
This is also affecting their borrowing ability, he said.
Small MFIs have extended the three-month repayment moratorium benefits to their borrowers in the wake of the lockdown, and are expecting the same from their lenders.
"All our lenders and banks /FIs may be advised to convert their outstanding loans into equity with 5 years of lock in period and additionally to provide loans for further lending.
Alternatively, these could also be converted to long term loans of 5-7 years with reduced interest rates," the letter sent by 33 small MFIs to the minister read.
These entities also said the lockdown "has impacted the micro businesses of the informal sector" supported through their lending.
"Due to stoppage of businesses and erosion of savings of our borrowers, repayments will be hugely affected," the small MFIs pointed out.
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