Letters: MFI mix-up

This refers to the news report “ADB refuses to back loans to Andhra MFIs” (March 24). The author is confusing Self Help Groups (SHGs) being formed by the government and Joint Liability Groups (JLGs) formed to avail of finance from micro finance institutions (MFIs). In the former case, the SHG is the borrower. In the latter case, the individual is the borrower; each individual guarantees four other members of the group. Thus, individual promissory notes are obtained by MFIs, which is a normal practice, and not a violation of the Reserve Bank of India guidelines. The report makes a sweeping statement that MFIs recover loans through coercive methods, which is incorrect.

The rural development secretary says that 51 suicide cases are allegedly linked to MFIs. However, recently in a reply to an RTI query this figure was revealed as 35. Once the investigation is completed, how many suicides are actually due to MFI recovery practices is anybody’s guess. Even then, 35 cases of suicides in a total loan portfolio of about Rs 7,500 crore consisting of about 6.5 million borrowers is a drop in the ocean. The deaths due to road accidents in Hyderabad are about 900 every year. Are we shutting down the traffic police of Andhra Pradesh or the Greater Hyderabad Municipal Corporation for maintaining the roads badly or not enforcing traffic discipline? We are not holding any brief for the MFIs but in our anxiety to punish them, are we not throwing the baby out with the bathwater?

B Vithal Rao, Hyderabad

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