Just as the microfinance sector appears to be emerging from a prolonged asset-quality stress cycle, a weaker monsoon forecast threatens to create fresh challenges. With the India Meteorological Department (IMD) downgrading its southwest monsoon forecast to “below normal” — potentially the weakest in 11 years — concerns are resurfacing for India’s over Rs 3-lakh-crore microfinance industry. The IMD has revised its June-September southwest monsoon forecast to 90% of the long-period average, down from 92% projected earlier. It has also indicated that El Niño conditions are likely to develop during the season. A weaker-than-expected monsoon could hurt agricultural output, strain rural incomes and stoke inflation, prompting microfinance lenders to take a more cautious approach to fresh loan disbursements.