| MFIs in the state were supposed to provide easy loans to the poor, organised as self-help groups (SHGs), especially in coastal areas. |
| But lately, their brutal side has been in evidence. In Krishna district alone, up to 15 suicides have been reported, the reason cited being harassment by MFIs, says Joint Collector S Suresh Kumar. Some MFIs are known to charge up to 25 per cent interest. |
| The government has now started the process of reforms. "We are not stopping MFIs completely but want to streamline the system," Kumar added. |
| The Andhra government has been talking with ICICI Bank, which has taken the lead in changing the rules of the game. The plan is to implement a reform programme for MFIs supported by the bank. |
| This will include a15 per cent diminishing rate on all loans, reimbursement of savings collected against RBI guidelines and return or adjustment of security deposits paid earlier. |
| An important step the bank has agreed to is the "multiple repayment option." Now the borrower can choose to pay back weekly, fortnightly or monthly. The earlier model, in which he had to pay back every week, led to harassment by MFIs. |
| Government officials said some MFIs used to collect blank promissory notes for loans. Others evaded insurance claims by paying the burial/cremation costs of the insured. |
| "MFIs will now be compelled to pay the insurance amount to the next of kin of the insured," Vijaya Mohan, programme director, microfinance, said from Hyderabad. |
| Lack of regulation is a serious problem. The government is hoping that MFIs which do not come under the ICICI net also agree to these terms and conditions. |
| The state government is also also keen on developing the Business Correspondent model, as envisaged by the Reserve Bank of India. |
| Under a pilot project, Krishna district's 46 grama sanghas (village units) will coordinate as "business correspondents" between SHGs and MFIs and collect interest. |
| "The government will act as a facilitator," Mohan said. |
| "Based on the success of the six-month pilot, we plan to extend the model to other districts by the next financial year," he said. |
| However, some MFIs defend the institution. "Without a study, how can you blame all MFIs. None of our clients has committed suicide," LH Manjunath, executive director, Shree Kshetra Dharmasthala Rural Development Project in Karnataka (SKDRDP) said. |
| "There may be others who charge high interests but we provide loans at 11 per cent," he said. |
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