Stay tuned with CashEssentials news ! - beyond payments
By subscribing, you accept our Privacy Policy.

Indian microfinance firm impacted by demonetisation

Categories : Cash connects people, Cash is a social network, Cash is the first step of financial inclusion
May 18, 2017
Tags : Demonitisation, India, Liquidity, poverty, Social cohesion, Social Inclusion
India's demonitisation last November has also affected small microfinance firms - directly impacting small industries, farmers and other unorganised sectors of the economy.
Communication Team / Equipo de Comunicación

Ujjivan Small Finance Bank recently reported that the removal of India’s two highest banknotes had a negative impact on the quality of its assets and impaired its expansion plan to move from a microfinance firm to a small finance bank. Small banks are entities designed to provide financial inclusion to sections of the Indian economy not being served by other banks, such as small industries, farmers and unorganised sector entities.

Ujjivan Bank became a small bank last February, but according to CEO Samit Ghosh, growth was significantly slowed by the abrupt demonetisation of the Rs 500 and Rs 1000. Ujjivan’s gross non-performing assets (NPA) jumped from 0.28% of outstanding loans to 3.7% after the government’s move in November, and loans worth Rs 180 crore might have to be written off. Furthermore, Ujjivan was unable to disburse loans for a period of a few months.

Microfinance currently accounts for 85% of Ujjivan’s business but should come down to 50% in the next 5 years. The bank plans to expand its revenues by introducing insurance and home loans for low-income workers and small and medium companies.