Investigation | In India, Microfinance is Destroying Women’s Lives

West Bengal – On a late February evening this year, in a small village in India's West Bengal state, two loan collectors parked their motorcycle outside 36-year-old Sunita Das's house and refused to leave until she paid an overdue weekly installment ₹2750 ($28). The problem was, she didn’t have the money to pay it.

The men were physically imposing. They shouted loudly enough for neighbors to hear and stayed for hours. Months later, the sound of a motorcycle still fills Das with fear.

“[For a long time] they refused to leave without the money,” Das says from her home in the village of Jamladanga Dighirpar, Nadia district. “When I could pay the installments, there was no problem. But when I cannot, they speak to me very badly. They insult my children. They have no respect for a woman.” In the end, they left and she paid the installment a few weeks later.

Das earns a living finishing handwoven sarees, unstable work that depends heavily on dry weather as rain prevents the dyed and starched fabric from drying properly. Hoping to supplement the family's income, she and her husband borrowed ₹300,000 ($3,150) from Bandhan Bank, a financial services company that provides microfinance and claims to empower women through small loans, to open a bicycle repair shop in 2024. 

When the business failed due to low earnings, she borrowed ₹215,000 ($2,230) a few months later in 2024 from Axis Bank's microfinancing unit, to keep up with repayments. She now owes both lenders close to ₹245,000 ($2,545).

“You can't do any work when someone is sitting outside your door like that. I’m afraid when they come late at night. We worry that something bad might happen,” says Das, whose hands are stained yellow with the starch used to craft traditional sarees.

Why microfinance targets women

Her story is similar to that of tens of thousands of women across India who take on multiple microfinance loans to support their families and livelihoods but struggle to keep up with weekly or monthly repayments when their incomes fall short. When they default, many women report facing intimidation, harassment and pressure from loan recovery agents.

It has been nearly 50 years since Bangladeshi economist Muhammad Yunus pioneered modern microfinance with the promise of helping poor women escape poverty through small, collateral-free loans. For decades, microfinance was celebrated by economists and institutions as an anti-poverty tool. The model spread rapidly across South Asia. Governments embraced it. International development organizations championed it.

India's microfinance sector now serves about 55 million unique borrowers through 76 million active loans, with borrowers collectively owing lenders ₹2.77 trillion ($29 billion) – 95% of them are women. As of 2025, women in India hold $800 billion in credit, nearly five times the amount recorded in 2017.

According to experts who spoke to Fuller, women like Das are deliberately targeted as borrowers, seen as more reliable, but also easier to pressure and intimidate. Limited access to formal banking, land and independent income makes them vulnerable, while social norms around shame and honor intensify the cost of default.

West Bengal has emerged as one of the largest markets for microfinance. There isn’t a clear socioeconomic reason for this, but at least 26 major lenders compete for low-income borrowers, and among the 25 districts in India where private microfinance is most common, six are in West Bengal. Women's organizations and labor activists Fuller spoke to say that competition has fuelled mounting debt and increasingly aggressive recovery practices.

Bandhan, one of the country's largest and oldest microfinance lenders, was founded in the state in 2001 and continues to have a significant share of its microfinance portfolio concentrated there. All six women interviewed by Fuller had borrowed from Bandhan.

Monalisa Sinha, West Bengal state secretary of the All India Democratic Women's Association (AIDWA), one of India's largest grassroots women's organizations, says cases like Das’s are no longer isolated. “Particularly in rural parts of West Bengal and in low-income areas, you will see thousands of women are in debt and facing intimidation,” Sinha says.

Catastrophic consequences

Interviews with borrowers, women's organizations and labour activists suggest that the transformation of microfinance from a development initiative into a competitive commercial industry has left many low-income women trapped between mounting debt and aggressive recovery practices, such as repeated visits to borrowers' homes, public shaming, verbal abuse and intimidation.

Madhuja Sen Roy, a politician with the Communist Party of India (Marxist) who works with indebted women in West Bengal, says reports of women fleeing villages, facing harassment and threats, or dying by or attempting to kill themselves over debt have become “very common”.

Moumita Chakrabarty, West Bengal Co-ordinator of the Self-Employed Women's Association (SEWA), says lenders cultivate relationships in villages long before repayments begin. “The agents come to villages, build relationships with people and tell them they will receive many benefits if they take a loan,” she says. “Rural families have very little cash, and the companies take advantage of that.”

In an economy of low wages and high inflation, Sinha says that “hyper-competition” has produced “catastrophic” consequences for women.

In 2025, a survey of more than 6,000 women across India by AIDWA found loan collectors barging into bedrooms, locking women inside their homes, seizing essential items, and in some cases physically and sexually assaulting borrowers.

Six women interviewed in West Bengal by Fuller described recovery agents waiting outside homes for hours, repeatedly telephoning borrowers and their relatives, demanding repayments late into the evening, and returning week after week until installments were paid.

One borrower, Dali Das, 47, a bidi (leaf-rolled cigarette) roller from Jamladanga Dighirpar village, who also borrowed from Bandhan in West Bengal, says loan collectors harassed her by hurling abuse “that she cannot even talk about”. They intimidated her with violence by aggressively charging at her as if they were going to strike her, demanded she sell her belongings and threatened they would have her things forcibly taken away.

‘They would abuse my mother’

In Purba Bardhaman district, 85 km from Das’s village, Ashta Karmakar used to clean homes and occasionally work at weddings, while her son, Raju, found daily-wage work whenever he could. But that was not enough to cover household expenses after her husband's paralysis in 2020 pushed the family to the brink, so she borrowed ₹1,00,000 ($1,050) from Bandhan that same year.

"When they came to collect the installments and we couldn't pay, they would abuse my mother," Raju says. The agents visited every week, usually arriving on motorcycles in the evening. They stood outside the house and shouted until she came out. They would then shout at her and verbally abuse her. 

Raju says the relentless harassment slowly changed his mother. Weeks before her death, she told Raju the recovery agents had abused her “badly”. “They had shouted at her and told her that if she could not pay, she should sell herself in the market and get the money,” he says.

She became withdrawn, barely ate, slept little and repeatedly told her family she felt trapped.

During the final week of her life, in May 2026, the pressure intensified. “One night,” Raju recalls, “she said if she died, this humiliation and harassment would end”.

The night she died seemed ordinary. After dinner, the family went to bed. Soon afterwards, Ashta developed severe chest pain and stopped breathing. A medical report seen by Fuller shows that the 50-year-old had suffered cardio-respiratory failure. Rahul Ramteke, a Delhi-based cardiologist, confirmed to Fuller that “chronic stress can lead to depression, and that could lead to heart attacks”. Her family is deeply disturbed and believes that the stress of the repayments may have led to her death.

Warning signs 

For Das, stories like Ashta’s are not uncommon. She has heard of many such incidents in West Bengal. For her, they serve as a warning of what debt can lead to.

The warning signs have been clear for years. After more than 80 reported suicides linked to coercive microfinance debt collection in Andhra Pradesh in 2010, the Reserve Bank of India – India’s central bank – recommended stricter regulation to curb over-lending.

But in 2022 it removed interest-rate caps on loans, arguing competition would protect borrowers. Instead, over-indebtedness and abusive debt collection have persisted.

Despite repeated scandals, these practices continue. Politician Sen Roy believes the problem stems from what she calls a “deliberate structural vacuum of regulatory oversight, deep-rooted political protection, and the silent compliance of the commercial banking giants”.

Sen Roy also believes policing has failed borrowers. “Over the last 15 years, the police have functioned more as a political institution than an administrative one,” she says. “Even if an honest officer wanted to act against an MFI [microfinance institution], political pressure would make it extremely difficult.”

Sahali Roy, inspector-in-charge at Krishnagar Women's Police Station in Nadia district in West Bengal, rejects that accusation, saying police act on complaints of intimidation and harassment. However, she acknowledged that reports from women borrowers have increased in recent years, though she declined to provide figures. “We take action against people who harass women borrowers,” she says. 

Critics also question the microfinance regulatory system itself. India’s central bank guidelines prohibit intimidation, harassment and other coercive debt collection practices, and serious abuses may constitute criminal offences.

Legal expert and co-founder of the Vidhi Centre for Legal Policy, Debanshu Mukherjee, says weak enforcement and poor access to grievance mechanisms leave many borrowers without effective protection. The central bank also relies partly on industry-funded self-regulatory organizations, such as the Microfinance Industry Network and Sa-Dhan, to oversee compliance.

“It is a textbook conflict of interest,” says Monalisa Sinha of AIDWA. “When a woman faces abuse, there is no accessible, independent state ombudsman she can turn to.”

Bandhan, the lender named by all borrowers interviewed for this story, declined repeated requests for comment, as did the regulatory organizations Microfinance Industry Network and Sa-Dhan. Fuller also reached out to the Reserve Bank of India and did not receive a response.

The reports of coercive practices are not unique to West Bengal or India. Similar patterns have emerged across the Global South. In Cambodia, microfinance debt has contributed to widespread land loss, while in Bangladesh, where modern microfinance originated, borrowers continue to report harassment during loan recovery.

Experts say the problem is not microfinance itself but that commercial incentives and weak oversight have distorted its original purpose of helping poor women build livelihoods. Sen Roy says reform must go beyond tighter regulation to address the poverty that drives women into multiple high-cost loans.

“Borrowers need clear information about loan terms, stronger checks to prevent multiple lending, accessible and independent grievance mechanisms, and consequences for lenders whose agents use intimidation or harassment,” she says. The goal, she adds, should be to restore microfinance's original promise of helping women build livelihoods through lines of credit rather than trapping them in debt.

Back in Nadia, as rain clouds gathered, Sunita Das stacked freshly dyed cotton sarees inside her home.

“Sometimes I feel it will end if I just kill myself,” she says. “But that's not an option. The only option is to work and somehow survive.”

How we made it

Kilometres travelled: 2600 km

Countries our sources are in: India

Cold emails sent: 9

Hours of recordings: 6

Number of interviews: 10

This piece is published in partnership with feminist newsroom Fuller. The Mooknayak has not independently verified the claims made in this investigative report. For more global feminist reporting, subscribe to Fuller’s newsletter.