A small pocket in South India has made the microfinance industry (MFI) sit up and review its heady growth and practices.

Mohamed Saifulla smiles as he pulls out a thick folder in the pale green office of the Anjuman-E Islamia of Kolar. He may well smile. Saifulla and the Anjuman committee are in a great part responsible for the Indian microfinance industry now finding itself with its back against the wall.

The outgoing president of the Anjuman committee, made up of nominees from the town’s mosques, Saifulla has agreed to show us details of women borrowers who were harassed by microfinance institutions for repayments.

Instead what he brings out ceremoniously from a plastic bag is a file with clips of blog accounts, comments and newspaper articles about how the committee brought microfinance repayments to a grinding halt in Kolar.

“Most of them agree with us,” he says, basking in his new celebrity status and pointing to articles that say the meteoric growth of microfinance could lead to problems. Saifulla knows he has caught India’s MFI industry by the scruff of its neck.

Upon a directive from Anjuman in February 2009, Muslim women borrowers stopped repayments Kolar, Mysore, Ramanagaram, Tumkur and other neighbouring towns in Southern Karnataka amounting to a default of around Rs. 60 crore for MFIs, probably the biggest default in the Indian microfinance industry.