India: MFIs seek dialogue with State to end logjam
The Microfinance Institutions Network (MFIN) has sought a dialogue with the State government to end the present logjam over MFI transactions in the State since 2010.
After the State brought in the ordinance regulating the MFIs, the sector which used to lend Rs.7,000 crore, had not been able to lend anything now to the poor who had no access to bank loans. The MFIs had registered according to the stipulations brought in, but it was not translating into lending process, said Alok Prasad, CEO, MFIN, here on Tuesday.
He said there was an urgent need to find a way forward for the benefit of poor. Though the banks through SHG linkage were extending loans to some extent, there existed a credit gap of Rs.5,000 crore, he said.
As a result the poor were left with no option but to approach moneylenders paying exorbitant interest. The sector had offered loan restructuring package, interest reduction etc., to the tune of Rs.1,800 crore, but the State did not respond formally so far. The SIDBI too modified the package further and submitted it to the government.
“The entire client base of nine million is being treated as defaulter borrowers by credit bureaux. It is time they were turned into current borrowers with credit restructuring,” he said.
While the Reserve Bank of India was the regulator for the Non-Banking Finance Companies and MFIs, the State government came with an ordinance equating MFIs with moneylenders. “This duality of regulation was not helping the sector or the poor,” Mr. Prasad said. He hoped the Microfinance Institutions Bill 2012 introduced in Parliament would soon put a full framework of regulations in place for the entire country.
Disagreeing that the MFIs were responsible for driving borrowers to suicides, he said suicides were basically due to distress in rural economy and it should be addressed.
SOURCE: The Hindu