The West Bengal government has initiated a major drive to replicate the self help group (SHG) linked micro-finance institution (MFI) model in Tamluk, the district headquarter of East Medinipore.
Speaking at a seminar on micro-finance organised by the Confederation of Indian Industries (CII), M N Roy, principal secretary of the panchayats and rural development department of West Bengal, said, the scheme would be extended in 2008 to the six districts of Hooghly, Howrah, Burdwan, Jalpaiguri, West Medinipore and Cooch Behar.
M N Roy said the pilot MFI models at Tamluk and Bagnan Blocks set up a year back had registered profit on their own and this led to the decision take this model forward to five more blocks in the state this year.
Under the scheme, the SHG would pool resources from the local people, and lend it out for setting up small businesses.
The government would provide SHGs with a one-time grant of Rs 20 lakh.
Speaking on the occasion, Ardhendu Biswas, principal secretary of the SHG and self employment department of West Bengal, said that while while micro-finance institutions (MFIs) were integral to the economic development, they should be governed through proper regulatory framework.
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Kurush Grant, chairman of the CII finance and taxation sub-committee, said CII would interact with policymakers and regulators to ensure smooth and regulated functioning of the MFIs.
C D Srinivasan, general manager, Reserve Bank of India, said while the proposed microfinance bill would strengthen the micro finance institutions, RBI would desire a regulated and balanced growth in the sector.
Also, the continuous dependence of MFIs on government grants was detrimental to their functioning in the long run.
K S Singhwan, chief general manager of Sidbi, said the capitalisation of MFIs, involvement of private equity players in them and implementation of a code for fair practices were some of the major concerns in microfinance.
The broad focus of Sidbi in the coming months, would be creation of a high-level policy forum for convergence of various government policies and schemes for MFIs.
The country had only 1000 or so MFIs and these faced their own share of challenges and constraints and need to have more and more innovative business models to succeed.
The meet was attended by finance professionals from institutional and private investors, leading microfinance institutions, international and regional banks, emerging markets, specialists, rating agencies, government officials, researchers, SHGs, development sector, NGOs and social investors, who discussed the successes, challenges and trends of microfinance investment in India.
Panelists said MFIs should be focused on affordable credit for rural empowerment and more and more transparency among NBFC s, MFI s and organizations running various SGHs who require microfinance.
Srinivasan of RBI said MFIs needed regulation to protect depositors, ensure stability and help growth, with the proposed Microfinance Bill presently awaiting legislative approval incorporating good features of microfinance prevalent in countries like Peru, Bolivia, Bangladesh, Indonesia and the Philippines.
Singhwan said SIDBI had recorded a major concentration in South India leading almost to saturation and so, it was now aiming at a balanced geographical growth with a strong emphasis on the eastern zone.
SIDBI sanctioned about Rs 270 crore of sanctions of which Rs 247 crore had been disbursed to about 10 lakh people.
Gautam Nag of Nabard called for co-existence of MFIs and SHG bank linkages and more transparency, backed by self rating and affordable soft loans.
Nabard had invested Rs 200 crore on MFI capacity building, he claimed.