<p>The big MFIs will still be able to come out of the situation and consolidate and survive. The smaller ones would be the early ones to disintegrate and that would happen faster than what each of us would imagine. The smaller MFIs have already a problem on their ability to raise equity and now that debt is also a constraint, their funds have almost dried. They have expanded and it is very difficult in this industry to resort to retrenchment and curtailment of branches since it is linked to the last installment and each installment can be collected only by the person who has connect with the customer. Assuming that Banks relent and start some trickle here and there, they would not be in a hurry if the equation is not in their favour. Nothing less than 2:1 debt to equity would be allowed. The smaller MFIs not in a position to raise equity would start finding it difficult to make their ends meet and most of them would disintegrate.<br /><br />The solution of allowing them to act as correspondent of banks means additional cost on compatible technology which the MFIs currently do not have and neither are banks in a hurry to accept business correspondents without adequate and compatible technology support. Further, the pay-outs are not viable at all. This means we are only making their exit much swifter. Even if the MFIs are allowed to act as channel partners or franchisees, the need for adequate risk capital coverage would still cripple the MFIs as anything less than 20% risk coverage would mean risky for the banks and even if we assume the Banks curtail their lending rates to 12% and mark-up another 12% for the franchisee or channel partner, the costs involved in running a small MFI business is so high that the MFI would still find it difficult to make ends meet.<br /><br />Tough times for most unless their delivery mechanisms change and they adopt a different strategy than what they are currently doing.</p>