Abstract
The article is about the private micro-credit industry, collapsing in Andhra Pradesh, the Indian's largest state. Many borrowers have stopped repaying their loans. This movement was initiated by politicians because the industry would earn too much on the backs of the poor.
Indian banks are worried; they put $4 billion in this industry. While they survived to the financial crisis, they might suffer so much of this crisis.
The micro-credit was initially a non-profit organizations work, now many "social enterprises" that want to make money are on the micro-credit industry, extending the loans to very poor people at huge interest rates, without checking if they can repay or not. The authorities fears the Microcredit industry to become the Indian version of the USA's subprime. The common vector between the two markets is the "grow-at-any-cost strategy".
The crisis occurred in reaction against this phenomenon with disastrous effects: the authorities registered an increase of suicides of people who could not repay their loans. Even if a law was passed, stringing how they can lend and collect money, the local politicians encouraged people not to repay the loans: 10% of the borrowers repaid their loans in November.
Since the third of the borrowers live in this state were the 90% of them don't repay, this has many consequences all over India: it's much more difficult to lend, because the banks fears now the loans not to be repaid.
