MFIs poaching IKP members: Minister

Indira Kranthi Patham, the flagship programme of the state government that support the self-help groups, is under threat from the microfinance industry. Instead of finding new members, the MFIs were poaching members from select groups and forming a separate group for lending, according to rural development minister Vatti Vasantha Kumar.

Speaking at a workshop on ‘Social Security for the Poor' here, he said the Paavala Vaddi scheme would be extended to more people to ensure that MFI do not fleece. He asked the bankers to extend loans to the SHG-bank linkage programmes.

The government had asked the MFIs to make only monthly collections instead of the weekly collections now.

 

Later, B Rajashekar, CEO of the Society for Elimination of Rural Poverty, the nodal agency for SHGs, said the government would help banks recover the loans they lend to the groups. The government was now encouraging community-based recovery. In ten years from 2000, Rs28,000 crore has been extended to the SHGs. There are about 11 million SHG members in about 950,000 groups in the state.

The government has gone for a scientific study this year to identify groups that are eligible for renewing their credit from the banks. “We have made a list of the groups whose repayment will complete this year and only they will be eligible to get fresh loans,” he told Business Standard.

Each group is required to give a microcredit plan based on the credit estimates from the individual members, he said. Last year, the lending target to SHGs was Rs 9,000 crore but only Rs 6,500 crore could be achieved. This year, the target is Rs 11,500 crore, including Rs 7,500 general linkage and Rs 4,000 crore for the Total Financial Inclusion Plus scheme, which is yet to begin. So far, the government has achieved 60 per cent of the proportionate target.