Business

Banks support India microfinance lenders

  • 1 November 2010
  • From the section Business
Shobha Vakade, who took a loan from a micro finance company to start her own business
Microfinance is designed to help individuals with small business loans

India's banking industry has thrown its support behind microfinance lenders after weeks of upheaval and confusion.

Major banks like the State Bank of India, Standard Chartered and Citi have all agreed to continue lending to microfinance firms.

The multi-billion dollar industry was on the brink of a mass default.

The banks' support has hung in the balance since lenders became embroiled in controversy in the southern state of Andhra Pradesh.

About four weeks ago, authorities started blaming microfinance firms for a string of suicides in rural villages.

They claim the suicides have been caused by company malpractice, heavy handed debt recovery methods and high interest rates.

Lenders deny the accusations.

Microfinance is designed to offer small, cheap loans to poorer borrowers, often in rural areas, who have difficulty accessing funds from banks.

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