Disbursement by MFIs goes down after demonetisation

The demonetisation of high value currency notes has brought disbursements by micro-finance institutions (MFIs) virtually to a standstill.

MFIs like Bandhan and Village Financial Services are not being able to make any disbursements to self-help groups (SHGs) since November 9. This is true for the entire MFI industry as well, they said.

"Since small notes are not available, we are not being able to make any disbursements to the SHGs," MD of Bandhan Bank C S Ghosh said on the sidelines of a seminar on MFI held in Kolkata on Friday.

Bandhan Bank, formerly Bandhan Financial Services, is also into MFI lending besides extending normal banking credit. Ghosh said while the repayment by MFIs is on, disbursals have taken a hit.

"This is a temporary problem. Things will become easier once the new Rs 500 currency notes are pumped into the system," he said adding "the entire MFI segment is facing this problem."

Village Financial Services chairman Ajit Maity said, "Disbursements have been put on hold since November 9. Although it is creating some problem among the SHGs, this is temporary in nature." "This is expected to continue for some more time," Maity added.