'Ponzi scams pose problems for Bengal MFIs sector to get trade

The microfinance institutions of West Bengal are facing problems in getting trade licences from the authorities concerned following the busting of a number of chitfund scams in the state, a top official said on Tuesday.

There are about eight microfinance institutions (MFIs) registered in the state.

"The MFIs need to have a trade licence to open new offices from the authorities concerned, whether it is a municipality or a panchayat," secretary of the Association of Microfinance Institutions West Bengal (AMFI-WB) Kartick Biswas, said.

He said the local authorities are reluctant to issue trade licenses to the MFIs as they are sceptical after the spate of chit fund scams which took place in the state.

Ponzi firms such as the Saradha Group and the Rose Valley Group allegedly duped lakhs of people to the tune of crores of rupees, promising high rates of return on their investments.

"There is a need to spread awareness among the people that MFIs are not chit funds but duly approved by the RBI under its NBFC-MFI category," Biswas told reporters here.

In West Bengal, the MFI sector is growing between 30 per to 35 per cent in terms of disbursements, he said.

"Credit need in the state is higher. The MFI sector in the state has an outstanding of Rs 30,000 crore. It employs nearly 40,000 people", AMFI-WB VP Pranab Rakshit said.

About 85 lakh people have benefitted by the MFI sector in West Bengal, he said.

An MFI unit can disburse a maximum of Rs 1.25 lakh to each beneficiary - a self-help group comprising women.