Returning to Kolar: A Case Study on the Kolar Crisis-Affected Communities

This report combines two separate research studies conducted by Centre for Microfinance (CMF) in Karnataka, India, a region that experienced a local credit delinquency problem in 2009. CMF researchers visited the three districts that reported problems in repayment immediately after the defaults began. A research team revisited two of the three districts in 2011 to understand how the communities were faring two years after the crisis. The report sheds light on what CMF found in Kolar and Ramnagaram districts during and two years after the Kolar Crisis. It discusses study findings and presents recommendations. MFI operations in these communities had not resumed even after two years since the crisis. People living there reported that their overall economic condition seems to have deteriorated. Conclusions include:

• Multiple lending and borrowing led poor families into over-indebtedness;
• MFI policies such as no tolerance for late payments seem to have set the stage for coercive recollection practices;
• Acceptance and recognition as a legitimate industry from local leaders can reduce the chances of such crisis;
• There is a need for client protection and adequate financial literacy training.