Irrespective of what the Reserve Bank of India (RBI) thinks about the role of microfinance institutions (MFIs), the recent actions of the Andhra Pradesh government against these organisations for their alleged excesses in lending to the rural poor, have now assumed a pan-India significance.
Government of India's National Rural Livelihoods Mission (NRLM) and the International Network of Alternative Financial Institutions (INAFI), India, have joined forces with AP to correct what is termed as the 'mission drift' caused by gross commercialisation of microcredit in the last 3-4 years.
The two organisations, along with AP's Society for Elimination of Rural Poverty (SERP), are organising the fourth Alternative Summit, an international event, here from June 21 to 23. The theme is ‘Microfinance and Inclusive Development’. SERP spearheads the self-help group movement under the state rural development department initiative.
“There is a greater concern across the globe that microfinance programmes have been drifting from the original purpose and moving away from the primary objective of addressing poverty. They are more concerned with sustainability resulting in gross commercialisation...” the state government today said while announcing the details of the summit.
In AP, the MFI operations have come to a standstill with the fate of Rs 6,500-crore microcredit outstandings hanging in balance. The state insists on regulating the MFI activities backed by the special legislation it brought out last year even as RBI thinks there is no need for such a regulation.
Apart from microfinance practitioners from countries such as Bangladesh, Philippines, Afghanistan, Nepal, Sri Lanka, Africa and USA, the event is being attended by senior officials from both the state and the Centre besides the World Bank and the RBI. Union Minister of State for Environment and Forests Jairam Ramesh and chief minister N Kiran Kumar Reddy will inaugurate the event tomorrow.
INAFI chief executive M Kalyanasundaram said no mainstream MFI had been allowed to take part in the event. "The summit is being attended by those NGOs that consider microfinance as a part of their larger objective of addressing poverty," he said.
About 75 overseas delegates, 130 members representing community groups and 150 representatives from various NGOs are taking part in the event, according to Sunita Laxma Reddy, minister - Self-Help Groups and Women's Development.
SERP chief executive officer Rajasekhar said the government would soon announce the details of the proposed NBFC being exclusively set up for catering to the microcredit needs of women self-help groups in the state. The NBFC would be launched with a corpus of Rs 300-400 crore contributed by both the Centre and the state government apart from other financial institutions.
