Greater role for micro finance institutions urged

By Our Special Correspondent

NEW DELHI, MARCH 20. Sa-Dhan, the Association of Community Development Finance Institution, has sought greater role for the non-formal sector in reaching out micro finance services to help low income households, particularly women, in both rural and urban India to establish stable livelihoods and improve their quality of life.

Hailing the allocation of Rs. 100 crores made in the Union Budget for 2000-01 following recommendations made by the taskforce constituted by NABARD as a beginning in the right direction, the Sa-Dhan Chief, Mrs. Ela R. Bhatt, said it would make lot more sense for the Government to route these funds for providing micro finance to the poor through the micro finance institutions.

According to her, these organisations were better equipped to provided the micro finance services in the sense that they were more aware of their needs as they go along with these communities in organising activities focusing on their social and economical development.

Sa-Dhan, which was actively associated with the taskforce on micro finance, has pointed out that estimates have revealed that the total outreach as a result of different interventions cumulatively have touched the million mark in India. Yet unfortunately this growth has been marked by a decline of the formal banking sector in this area of service provision.

A close look at the official figures has also disclosed that the share in agriculture outstanding had declined from 15.94 per cent in 1989-90 to 10 per cent in 1997-98. Similarly, barring retail trade, the outstanding has declined in case of transport, artisans and village industries and other small scale industries. This is the result of increasing disinclination on the part of banks to service a client who were spatially and emotionally away from them and hence whose risk profile was difficult to assess.

The situation was further compounded by the quick money factor. In a sampling of 312 week borrowers in Tamil Nadu, incidental expenses for quick processing of loans amounted to Rs. 21 for every Rs. 100.

In contrast to the formal banking institution, the outstanding number of ultimate borrowers from micro finance institution has increased.

Mrs. Bhatt also said there was need to make changes in the law to provide recognition to micro finance institutions and organisations. The procedure ought to be simplified also to further facilitate operations by the organisations seeking to help the poor through micro-finance services.

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Section  : Business
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