India micro-credit sector

Has anyone read this article: It’s about a potential collaspe of the micro-credit system in India - although the scale is different than mortgage obligations that lead to recent financial crisis, problems of defaults arrises! (As mentioned, only 10% repay their loans…) Might we see the start of a new crisis in emerging markets? Could we imagine to have the same in China (not disclosed unfortunately as the information is state-controlled)? Can then investors have some fears about emerging markets future potential or is this an isolated problems? Any thoughts on consequences, further problems, satistics welcome! Paul

Wait, if only 10% of the borrowers repay the loans, what sort of interest rate do you have to charge to make this viable?

its okay, they’re debts are covered by friends and neighbors. we have the same system here in the us - its called welfare.

the fact that many low income villagers are the borrowers gives it a political angle and potential for harsh regulatory rules.i would be wary of investing in these Cos unless they’re trading at ridiculously low valuations. one of the prominent listed names in this sector is down 20% today.

Are these true micro-credit loans or more like payday/ cash advance style loans? They seem more like the latter.