Abstract
In India, more than 450 million people are outside banking orbit. Many economically deprived communities borrow money from money lenders who charged them to an extent of 115% interest. Microfinance was a strong tool to rescue the poor from Ponzi Schemes. Microfinance industry thrived well in India. It recorded huge growth in South India than North India. The Microfinance crisis broke during the year 2010 in Andhra Pradesh. A bill enacted in Andhra Pradesh made the situation still worse. The repayment rate of the Micro finance clients dropped from 95% (2010) to 1% (2012). This made the survival of the Microfinance Institutions (MFIs) questionable. The paper aims at exploring the solvency and survival positions of the Private & Public NBFC MFIs. Based on the Altman’s Z revised score model (applicable for financial institutions) and Survival analysis, the results reflect that Private NBFC MFIs are solvent and had better survival than Public NBFC MFIs. It aims at understanding the factors discriminating the solvent and insolvent Microfinance Institutions.
 JEL Classification Codes: G20, G21, G23, G28, G33.
Highlights
The Indian population is about 1000 million with a GDP of 5.4% during 2014 as per IMF estimates
The results show that public NBFC Microfinance Institutions (MFIs) SHARE and Spandana Sphoorty are still closer to 1 which means they are facing solvency risk whereas for the SKS, Bandhan and EQUITAS the values are below 0.5 and sometimes 0.3 too which meant they are closer to zero i.e. Solvency Score
The future of MFIs depends on the current performance and must be challenged to scale on operations, sustainability and cost (Thorat, 2006).The MFIs need to concentrate on solvency position to have better profitability and future
Summary
The Indian population is about 1000 million with a GDP of 5.4% during 2014 as per IMF estimates. Andhra Pradesh, a South Indian state outnumbered the national average. It ranked first in terms of loan portfolio and outreach. During 2010, client outreach was 31.4 million and the gross loan portfolio level was Rs 207 billion. Coercive recovery practices exhibited by the MFIs led to commitment of suicides in the districts of Andhra Pradesh (Ashta et al, 2015). This set a saturation stage for MF in the state. On an average the MFIs loan debt outstanding per household of pan India remained at Rs.7700, whereas it was Rs.65000 at Andhra Pradesh during the same period. The Bharat Microfinance Quick Report 2012 - Microfinance - Growing against All Odds reflected the Andhra Pradesh crisis
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