Bangalore: On a lonely, winding road in a hilly terrain near Mysore, 22-year-old Ravi Nayak C.K. drives as fast as his run-down moped can go to reach the next village.

Safety worries: Ravi Naik (in yellow shirt), a loan officer, meets borrowers at a village near Mysore. Hemant Mishra / Mint

His eyes keep darting to the rear-view mirror to see if he’s being followed. Nayak is a loan official for a microfinance institution, or MFI, and has been on the job for three months. In that short time, he has become aware of the not-so-safe side of his job as he hears of loan officials being mugged or even killed for the cash they carry.

On any given day, Nayak, who works for Grameen Koota Micro Finance Institution, carries Rs30,000-40,000 back to his branch office.

“We do get scared. One of our own people had his bag snatched away after chilli powder was sprayed in his eyes," Nayak said.

Nayak is among thousands of loan officials who live this fear every day. As microfinance institutions penetrate deeper into rural India to lend money to the poor, such attacks and worse have been reported.

In the last three months, two loan officials were murdered in Karnataka in separate incidents. The officials, employees of Hyderabad-based SKS Microfinance Pvt. Ltd, were on their way to disburse cash when they were attacked, chief executive Suresh Gurumani said.

Bangalore-based Grameen Koota has faced three instances of armed robbery in the past year. In the same period, Kolkata-based Bandhan’s branch office in the city was looted. Another Kolkata institution, Ujjivan Financial Services Pvt. Ltd, has faced five robberies in the last four months.

It’s easy to identify a loan official, particularly in rural areas. They travel to four or five villages every day to collect repayments, each village 5-15km apart and connected by lonely tracks. They commute on two wheelers, wear helmets, and carry bags displaying their firm’s logo. And they arrive at the villages on a stipulated day and time every week.

MFIs are not largely affected as both officials and the cash in transit are insured. Experts say the situation is not alarming yet but could become a huge issue for large MFIs employing thousands of officials.

“The entire transaction in microfinance business—disbursement, collection of instalments—is in cash. So much cash in hand is a big issue, and it puts our staff at huge risk," said Samit Ghosh, founder and chief executive, Ujjivan.

He sees no respite unless cash transactions are eliminated from the business. “We need to work out a mechanism so that we can disburse loans through cheques and customers can also pay us back through cheques."

As a way out, MFIs are urging the Reserve Bank of India (RBI) to allow them to act as business correspondents, so that they can handle money directly on behalf of banks, collect deposits, disburse loans and accept repayments through cheques. Currently, MFIs are barred from opening bank accounts on behalf of borrowers or handling deposits of clients.

For now, the microfinance institutions have to figure a way out to ensure the safety of their loan officials. “This is the first time that this kind of a thing has happened and we are also trying to figure out what to do," said Gurumani of the 11-year-old SKS Microfinance.

SKS’ loan officials are starting to carry chilli spray with them and are training in self- defence.

The firm is also ensuring that its officials do not go into deep, secluded, forest areas and is giving them bags without its logo.

Gurumani said SKS’ loan officials are insured and in case of a fatality, the family is paid a compensation immediately. Gurumani did not reveal the amount, but said it was “substantial".

Bandhan ensures that whatever money its loan officials collect is disbursed immediately, so they do not have to travel with much cash. Tamil Nadu’s Grama Vidiyal Micro Finance Pvt. Ltd (GVM) has collection rounds between 6am and 9am, so its officials can reach the branch office and banks in daylight.

Grameen Koota has a policy of not posting loan officials on duty in the areas they come from. “Local persons run the risk of getting influenced by borrowers. It mitigates risks of robberies," said managing director Suresh K.K.

And Ujjivan is considering asking customers to come to its offices to make their payments, but that would mean moving away from the doorstep facility that’s added to the success of MFIs.

None of the MFIs Mint spoke with for this story see hiring security personnel as feasible, though they agree their officials face a real threat. Hiring a guard for each official would cost Rs10,000-15,000 a month. “This cannot really be done. What will happen to our operational costs? We need to control them also to keep our business running," said Ujjivan’s Ghosh.