Why Microfinance is now a bad word?
Finance ministry must introduce a regulator for the agricredit monitoring
Yes, microfinance companies have now come under a cloud.
Andhra Pradesh government brought out an ordinance in 2010 end and asked the RBI to probe the scandals that have come out now in the open.
There have been the usual suspect roles by the microfinance (MFIs). They competed for the same clients, the very poor and they over lent, multiple lending and the same result, namely, suicides of the poor borrowers who couldn’t reap.
Now, the story is not new and not much for debate or argument.
Our banking system failed in its original mandate when the big banks were nationalised by Indira Gandhi in a huff as it were to settle scores with Morarji Desai. In India, in the way we are running our government there is the tendency to excuse the original sinners. So, we find excuses for blaming the others!
If the finance ministry is doing its job then, it must have supervised the banking system to carry out its mandate. The priority sector lending was neglected and hence the few good banks that were serious about their social commitments let down the priority sector targets and hence there was this persistence with under banked sections.
We talk of financial inclusion, a bogus concept. How can you have an inclusion without an institutional framework, without institutions and without safeguards etc?
Lending to the poor has always been a difficult job; it is as old as the days of the Raj.
So, rural indebtedness was very old and the spread and the grip of the rural money lenders is also a hoary institution in India. Simply because the rulers in Delhi are lax and they are also as irresponsible as you and me!
We see what the finance ministry did in the latest scandal of the telecom minister. When the minister ignored the finance ministry’s guidelines the finance ministry under such a veteran like Pranab Mukerjee must have alerted the Prime Minister and the matter must have been brought before the Cabinet and the Prime Minister must have acted in time.
Now, the Prime Minister has paid a heavy price, his reputation is shattered by the serious remarks of the Supreme Court.
Even now, there is a tendency to avoid the serious sinners. Whereas the looted money with the telecom scandal? The money is with all sorts of people, the public knows the people. Certainly in Tamil Nadu it is public knowledge where the loot is held.
So, now to talk of microfinance as if it is a great discovery by some NRI is simple humbug.
It is one more innovation at recent times. Now, the Grameen Bank concept is at the root of the MFIs. Now, after the SKS scandal came out it was also revealed that one high profile investor, namely, N.R.Narayanamurthy of Infosys had also invested, he picked up equity in the SKS and everything seemed normal, Infosys investor made a huge swelling of his value and till the SKS scandal bust ,no one knew that Narayanamurthy was also in this pie.
Now, for Narayana murthy to speak in very polite and diplomatic language was the cruelest cut.
Why?
As a high profile seeker of ethic in corporate governance he must have taken an active role and went out of the way to defend the ultimate beneficiaries, the voiceless millions who thought they have a chance in the life to escape from the eternal poverty trap.
Now, Murthy made his money and he resorts to diplomatic language.
Why the CDO, Gurumani was sacked from his? No one has brought out the truth.
Nor, the fact why the SKS was doing its job in such blatant unethical manner, so huge salaries for the top dogs and so high and unjustified interests, as high as 46 per cent.
Yes, we know the microfinance is to take the loan to the door steps of the poor, this involves additional cost and also many visits and this also costs money.
But then, there is the ethical dimension to a rural credit business.
Doest Mr.Murthy knows this aspect?
Why doesn’t he articulate these aspects?
Now, the MFIs want the banks to lend them more money and the banks refuse to oblige them. In fact, if we look the issues more seriously and with some gravitas, the Central government must have come out with some new ideas, with so many advisers around the PM, all economists and so many are men with some vision or ideals or some other and they must have forewarned the government, the banking system, the RBI and the bankers and there must have some framework and system to regulate the new institutions.
Of course, the ideals are the co-operative institutions. Even with the private players entering the scenarios, we have the model of the Bangladesh Grameen Banks system.
Even with the self-help groups and joint liability lending etc., there is here a clear lapse on the party of the government.
Now, what? Now, surely we have to put in a regulator for the micro credit institutions.
There must be strict guidelines not to go for fat salaries and ostentatious lifestyles as Mr.Gurumani is alleged to have been doing. We are not sure. We may be mistaken.
There is however some uncomfortable feeling that with Akula and Gurumani and with Narayanamurthy joining them, there is this let-down feeling.
All high profile, all crave for moral high ground and we have government machinery in New Delhi, which as the Supreme Court now famously did calling us, collectively or otherwise, as inaction when it comes to preventing wrong doing on such vast scales!
Let us reform the private sector money lending business for the poor in right
earnest!
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