MFIs find going tough in Krishna district

About 10 microfinance institutions (MFIs), including Spandana, Share, Asmita, Undamma Bottu Pedata and Guide, now find the going tough in Krishna district. Their image as the saviours of poor women is gone.

Now, they are treated as 'villains' collecting exorbitant interest rates (up to 50 per cent) and harassing women for repayment. So much so that the alleged high-handed recovery methods are reported to have led to about 20 suicides.

Along with their image, the hope of recovering Rs 130 crore they have given as loans to about one lakh women under group schemes in the district is also waning.

Surprisingly, they have a smooth operations in the other eight districts. The raging controversy in Krishna district has not affected their disbursements or recoveries.

In all, the MFIs have advanced about Rs 1,400 crore to over 10 lakh women of slum, semi-slum and lower-middle class areas in the nine coastal Andhra districts.

About 50 cases are pending against 50 executives, branch managers and directors of MFIs in Krishna district.

According to U V S Raju, deputy commissioner of police (DCP), 12 of these cases were registered in Vijayawada and 10 at the district headquarters of Machilipatnam, and police would chargesheet them anytime. Police arrested an MFI branch manager and released him on bail recently.

The banks, whose money MFIs give as loans to women, plead with the government that by and large MFIs' functioning in the state is satisfactory and that any government interference at this stage would only affect its avowed social welfare objective of uplifting women from poverty and their economic empowerment.

However, the government is understood to have advised the banks to take active role in loan recovery process and mechanism without leaving it entirely in the hands of MFIs.

The official Jawahari Committee, in its report submitted to the government, found fault with the MFIs. However, the MFIs rejected the report, calling it one-sided. They charged Jawahari with not giving a chance to them to present their case.

The government then appointed another high-level committee comprising some principal secretaries. The government is expected to take a concrete decision only after receiving a report from the high-level committee.

The government has also introduced an amendment (Bill) in the Assembly, providing for using the Money Lending Act against the erring MFIs. The Act is yet to receive President's assent. As the RBI deregulated micro finance, it is said that the government is in a quandary as to how to proceed against MFIs.

Micro finance circles admit that when there were only one or two MFIs operating in the state some years ago, flat interest rate touched 24 per cent and effective rate 40. Now with about 10 MFIs in the field, effective interest rate, with a flat rate of 10-12 per cent, has been pegged at 20-24 per cent.

Experts feel that the transitory phase of micro finance is over. It has now entered a matured second phase, indicating its golden future.

In the first phase, MFI organisers were overenthusiastic to offer loans at doorsteps, which resulted in some slips. The same women took loans from three or four MFIs at a time. Those who do not have any income source took loans to buy luxury goods and for education and medical needs and have failed to repay them.

The issue kicked up so much dust that the AP Human Rights Commission too toured the coastal districts and recorded statements of a number of MFI victims. About 30 women deposed before the commission in Vijayawada.