Why are our farmers increasingly committing suicide? Many people would hold oppressive and insensitive governance responsible for such a situation. Let us take the case of those farmers of Bolangir District who, in good faith, temporarily transferred over 350 acres of their land for three years to some people of Delhi and Agra. To their utter surprise the farmers found that the lessees had completed registration of those lands in their names and swindled them through connivance of people in government. The Revenue Divisional Commissioner reported to government in 2007 recommending action against the concerned people. The concerned file has been lost in the Revenue Department of the Government. If cunning people can circumvent laws and rules and get away with ease, one gets a feeling that governing apparatus is working more for such elements of the society to the detriment of the innocent. In such a situation the hapless citizens lose their balance of mind and some take the extreme step to end their lives. Yet, in most cases government washes off its hand and refuse to own responsibility by passing on the blame to others. In Andhra Pradesh, the Self Help Groups (SHGs) implementing the state government-led programmes reached 54% of the rural households, followed by moneylenders (37%) and MFIs (17%). Yet the MFIs, without any independent investigation, have been blamed for the suicides, as I learn from a statement made by Mr Samit Ghosh, Managing Director, Ujjivan Financial Services.
MFI sector which reached out to the poorest of the poor and added meaning to the slogan of financial inclusion today are gasping for life. On the 22nd of this month Sa-Dhan is organizing the Microfinance Roundtable at Bhubaneswar with the objective of meaningful revival of the MFIs in the state. I would expect that the state government would look at the sector more kindly and appreciate how the indifference of the Banks has spelt disaster to the sector and a situation has been created to add more misery to the lives of the poor. Sa-Dhan is an association of 251 member-organization from 19 states of the country and its Odisha Chapter has 26 member MFIs having their head office in Odisha and 9 national MFIs with the branch offices in the state. The microfinance institutions operating in Odisha reach out to more than 2.5 million clients. On 31st October,2010, these MFIs had an outstanding of over Rs 1800 crores. MFIs confined to Odisha cover 12 lakh clients and their outstanding is around Rs. 500 crores. These institutions are reaching out to the women in backward Districts and disadvantaged communities. Almost all the state level MFIs are NGO based MFIs and have been serving the community for ten to fifteen years by addressing different issues related with health, sanitation, education, child labour & women trafficking, women empowerment, human rights, tribal development, employment generation, livelihood support etc.
It is a paradox that such work is not formally recognised. The sector has been still kept outside the purview of the state and district credit committees. After years of lobbying, the Association of Karnataka Microfinance Institutions (AKMI) has been inducted into the state-level bankers' committee (SLBC). It is necessary to have the representation of Odisha MFIs in the SLBC. I hope the state government would take favourable decision on this soon. MFIs should also get represented in the District Consultative Committee (DCC). The issue of multiple lending is an important one. If a person borrows from different agencies without regard to his capacity to repay, he fails to service the loans. This practice needs to be checked in the interest of the borrowers as well as the MFIs. In many cases MFIs face difficulty in getting the borrowing antecedents of the customers. This deficiency can be got over by having a state level Credit Bureau on the line of Credit Information Bureau at national level. State government could be the facilitator. I would look forward to initiative from the state government on this.
The Micro finance operations in the State were running smoothly. The Ordinance of Andhra Pradesh threw the entire micro finance sector into a crisis. Bankers and lenders stopped new lending and even regulated release of funds for earlier sanctioned loans to MFIs in the state. The state government of Odisha and the Banks operating in Odisha have to appreciate that the microfinance environment in Odisha is different; but the sector is being penalized by being starved of funds. Reserve Bank of India has initiated measures to resolve the liquidity problem of MFIs and advised the banks to ensure the adherence of the regulatory guidelines issued; but the lenders are still maintaining stoic silence. The state government should not be a mute onlooker. It must intervene and ensure resumption of credit to the worthwhile MFIs of the state. If it does not, then within six months most of the small MFIs will be closed.
In this background, the initiative of the Odisha Chapter of Sa-Dhan to have the Microfinance roundtable in Bhubaneswar on 22nd November is both commendable and timely. This occasion would provide a platform to facilitate an interaction among different stakeholders and, hopefully, lead to the survival of the microfinance sector. The extent of success of the event is dependent on the proactive role of the state government. The state government cannot be oblivious to the reality that microfinance, as a movement, has not only provided the communities with requisite financial services but also built the social capital through financial literacy, pension plan, remittance, insurance, understanding peer value, inculcating entrepreneurship, empowerment. MFIs are also serving the community with different intervention-capsules for helping the affected people to come out of economic distress during unprecedented situations like drought and flood.
MFIs would, I am sure, welcome the early passage of the Micro Finance Institutions (Development & Regulations) Bill, 2011. The draft legislation has a number of welcome features like protection of the customers through an Ombudsman; keeping the MFIs-- which are registered with RBI-- out of purview of the State Moneylenders’ Acts; making MFIs eligible to undertake whole range of financial services needed by the poor; making MFIs eligible to tap small savings. The draft legislation does not insist on higher capital requirement for MFIs nor does it enforce consolidation of the industry which may be in the long run anti competitive. The draft Bill also provides for bigger MFIs functioning as Trusts or Societies to convert into more transparent entities as Section 25 Companies or NBFC-MFIs. The draft Bill however stipulates financial product specifications, margins and interest rate caps. I would expect early passage of this long-needed legislation. I believe that a healthy MFI sector is a sure antidote to poor man’s suicide. I would urge the state government and the Banks also to believe this.
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