Microfinance Focus December 29, 2010: Stung by an industry-wide liquidity crunch and abysmal repayment rates in Andhra Pradesh, Microfinance Institutions (MFIs) are facing yet another blow. Microfinance Focus has learned of a large number of employees being laid off by some MFIs.

As per sources, more than 500 loan officers have been laid off by one of the biggest microfinance companies in Andhra Pradesh. Another Tamilnadu-based MFI also took this serious step and reportedly laid off many of its loan officers. The reasons for the layoffs are believed to be efforts to reduce costs. Many MFIs have also postponed employees’ promotion and have extended the probation periods of recent hires..

“We were completely dependent on this sector for our employment and it was much unexpected to come across a disappointment like this,” said a former employee of a major MFI in AP adding, “Some of us have now begun looking out for jobs outside the sector itself, owing to the uncertainty in jobs in the MFI sector.”

The current ranks of middle management of many of the MFIs located in southern states also face uncertainty with regards to their future careers in the sector.

As a matter of fact, the Microfinance sector is responsible for significant employment, especially among the rural youth of India. According to the latest figures published on company websites, 21,154 staff are employed at SKS, 10,400 at Spandana, and 6,467 at Share. Combined, India’s largest ten MFIs provide employment to approximately 60,000 people in all. Industry experts also suggest that the sector employs more than 1,50,000 people.