Fri Jan 24 13:55:13 UTC 2025: ## Karnataka Investigates Microfinance Institution Practices Amidst Suicide Concerns

**Bengaluru, January 25, 2025** – The Karnataka state government is launching an investigation into microfinance institutions (MFIs) following reports of borrowers taking their own lives after taking out loans. Chief Minister Siddaramaiah will chair a meeting on Saturday to discuss a potential ordinance regulating MFI activities.

While some blame MFI loan pressures for the suicides reported across districts including Ramanagara, Tumakuru, Shivamogga, Belagavi, and Kalaburagi, sources within the MFI sector claim the issue is more complex. They point to borrowers taking loans from multiple sources, including moneylenders at exorbitant interest rates, alongside family problems and influence peddling by local leaders who collect commissions on loans.

Manjunath M.S., assistant vice-president of the Microfinance Industry Network (MFIN), highlights that many Self Help Groups (SHGs) and Joint Liability Groups (JLBs) borrow from MFIs for personal needs or small businesses, with repayment schedules ranging from weekly to monthly. Loans typically range from ₹30,000 to ₹50,000 or more for group businesses.

Concerns have been raised that an overly restrictive ordinance could negatively impact access to credit for vulnerable populations and lead to increased moneylending. P.V.S. Suryakumar, former deputy managing director of NABARD, advocates for “right regulation, not over-regulation.”

The growth of MFIs in Karnataka has been significant, with client numbers increasing from 4.2 million to 9.9 million between 2013 and 2022, and the total loan portfolio rising from ₹16,946 crore in 2019 to ₹42,265 crore in 2023-24. While borrowers often prefer MFIs due to simpler documentation compared to nationalized banks, the average loan per client in Karnataka (₹44,036) surpasses the all-India average (₹42,838). The RBI has consistently issued guidelines to address issues with errant MFIs. The investigation aims to find a balance between protecting borrowers and ensuring access to vital credit.

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