Major Episodes of Risks in Indian Microfinance Sector

The illustration above maps major risk episodes in the Indian microfinance sector.  As the sector has scaled up over time, so has the magnitude of the impact from these episodes. Interestingly, a reading of the literature available on these risk episodes points to an interesting commonality in the progression of risks in each of these episodes.

1. Deterioration in relationship of the MFI(s) with its (their) clients
2. Localized contagions and involvement of local interest groups such as religious leaders, local politicians
3. Reputation of MFIs hit, liquidity dries up
4. Regulatory and administrative action against MFI(s)
5. MFI failures