A man with a mission to manage microfinance

Of all the all voices raised against the high interest rates charged by microfinance institutions (MFIs), one person’s voice proved most important. It was that of R Subrahmanyam, principal secretary, rural development department, Andhra Pradesh. He is also the one behind the drafting of the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance, 2010, which has now become a thorn in the flesh for many MFIs, particularly for its clauses on loan recovery.

He is quite clear about the agenda. “There is no point in finding fault with lower-rung employees. They do as directed by the top management,” he says. The ordinance now makes the senior management of an MFI responsible for any coercion against borrowers.

Subrahmanyam has been studying microfinance and its associated problems for over a year. An officer belonging to the 1985 batch, he was previously managing director of Andhra Pradesh Housing Board Corporation and was transferred as secretary, rural development, in October 2009. He was elevated to principal secretary in January.

“We have decentralised the monitoring of MFI activities. There will be separate panels keeping a tab on them on a daily basis,” he says. The focus now is on creating an IT-enabled system that will make microfinance lending more transparent. Subrahmanyam says there has been a lot of change since the government issued the ordinance. “Now, more people are asking questions about microfinance,” he says.

Drafting the ordinance was not a cakewalk, either. “We first took a lot of inputs from field-level staff. The special government pleader in the advocate general's office was consulted on the legalities and scope of operations,” he says. He also makes special mention of Justice Jagananth Rao, a retired Supreme Court judge, for his suggestions on the formulation of the ordinance.

Subrahmanyam even browsed through court orders from other states that relate to the microfinance sector. “Some meetings were very long,” he recalls, occasionally glancing at his mobile phone, which is kept in silent mode for most of the interview with Business Standard. “There are too many calls. We should also work,” he says.

Like several of his peers in government, Subrahmanyam studied management and has the rural department’s data at his fingertips — quite literally. A lone laptop and a few notebooks adorn his table. “Capping interest rates is not within our purview. But we want people to make informed decisions from the choices available to them,” he says.

But his task is far from over. The ordinance needs to translate into a Bill. Though the winter session of the Assembly is around the corner, Subrahmanyam is busy tying up loose ends on the draft legislation that will cast his mission in stone.