This refers to the news report “RBI forms panel to look into MFIs’ activities” (October 16). This is a welcome move. The Reserve Bank of India (RBI) should also look into the lending activities of non-governmental organisations (NGOs) that receive bank credit or external funding since these organisations are facing allegations similar to those against a section of non-bank lenders like microfinance institutions (MFIs).
NGOs are present in almost every field, from spirituality to health care to information technology and charity. Most of them carry on with the traditional cooperative spirit of accepting contributions from members for everyday activities and donations for maintaining their “no-profit no-loss” position. In the process of their evolution, some of them have unintentionally displaced several people from their traditional vocations. Unintentionally, because the process has been gradual and was not as planned or conspicuous as the throwing out of retail business community by shopping complexes in cities.
NGOs often ignore the existing infrastructure, manpower and practical wisdom abundant in the local people. These organisations could gloss over the fact that ultimately costs were to be shared among the beneficiaries whether as interest on loans or as erosion of capital or in the form of subsidy from the government. Similar situations have arisen in education and health care. The existing network in these areas would have performed wonderfully well with much less support than the NGOs received, had there been an effort to understand their problems, upskill their manpower and compensate their normal business losses by allowing cross-subsidisation of costs or having the government accept social responsibility and fund unanticipated losses.
Moreover, the glorification of donations (especially if they come in dollars from abroad) and the aversion to subsidy even though it meant deferred prices or wages are also responsible for the failure of traditional institutions and business including agriculture.
M G Warrier, Mumbai
