Desaraju Surya, [ Tuesday, May 09, 2006 02:03:14 amTIMES NEWS NETWORK ]
HYDERABAD: The one-man inquiry commission constituted to probe the excesses of micro-finance institutions (MFIs) in the state has strongly recommended that the state government crack the whip on the MFIs for grossly violating the human rights of the poor borrowers in the name of recovery of loans.
Special chief secretary V P Jauhari who headed the commission, in his findings, observed that the MFIs grossly violated the human rights of the poor and made huge profits at the expense of the borrowers. The state government should immediately take suitable action against the MFIs for violating the human rights.
The special chief secretary also stressed the need for expediting the enactment of Money-lenders' Act to rein in the MFIs. Also, they should not be allowed to operate without a valid licence.
Significant among the recommendations made by Jauhari in his comprehensive report submitted to the state government last weekend is that lending should be henceforth confined only to the women self-help groups and not individual members.
"The MFIs should be asked to cut down the interest rate to a maximum of 12 per cent per annum and no other charges should be levied. Besides, the repayment should be on a monthly basis and not the existing weekly basis.
The loan repayment term should be between one year and three years. "The MFIs should send monthly reports to the project director of the respective District Rural Development Agency on the loan disbursals to the SHGs," Jauhari recommended.
Observing that several small private money-lenders have already come into the picture following the success of the MFIs, Jauhari cautioned that there was a possibility of "other criminal elements" entering the fray since "easy money" was involved.
This could lead to law and order problems in the future, he added. The respective district collectors and superintendents of police should closely monitor the MFI activities.
Noting that the Union finance ministry was thinking about involving MFIs in anti-poverty programmes and external funding agencies like the World Bank and International Fund for Agricultural Development (IFAD) recommending to the states to involve MFIs, Jauhari wanted the state government to alert the Government of India and the Reserve Bank of India about the "illegal and unethical practices" being adopted by the MFIs.
"This will help other states learn from the sad experiences of AP," he added.