Centre mulls involving MFIs in poverty reduction programmes

Having run into rough weather for adopting ‘illegal’ business practices in Andhra Pradesh, MFIs are now trying to ‘legitimise’ their activities by seeking to join hands with the state government to provide “sustainable financial services to poor women”. The Union Finance Ministry is also said to be keen on involving money lending agencies in anti-poverty programmes.

Though the Centre had not taken a formal decision yet, it had informally sounded the state governments on this, days before the current controversy involving microfinance institutions (MFIs) broke out in Andhra Pradesh, highly placed official sources here said.

“In fact, such a proposal first came from external funding agencies like the World Bank and the International Fund for Agricultural Development (IFAD). They recommended the states which have been borrowing from them to involve MFIs in poverty reduction programmes. The Government of India is probably trying to implement the World Bank agenda,” a top bureaucrat pointed out.

But, IAS officer V P Jauhari, who retired as the special chief secretary to the government and led an inquiry into the activities of MFIs in the state, cautioned against involving MFIs in government programmes. In fact, he suggested the state government alert the Government of India as well as the Reserve Bank of India about the “illegal and unethical practices” being adopted by MFIs.

“This will help other states learn from the sad experiences of Andhra,” he added.