Tough bank-linked loan scheme prompts small traders to turn to pvt financiers
With the Andhra Pradesh State Minorities Finance Corporation (APSMFC) refusing to do away with its old bank-linked financial assistance scheme, small-time traders and entrepreneurs in the city are forced to bank on private financiers and money lenders for assistance.
This is at a time when the coffers of the APSMFC are brimming with funds. The APSMFC was sanctioned Rs. 75 crore for bank-linked loan scheme for the financial year 2013-14. However, it could spend just Rs. 7 crore out of the allotted sum till December.
Worse, officials do not expect to release more than Rs. 15 crore by the end of the financial year, thanks to stringent guidelines and apprehensions of loan recovery by bankers.
“Availing loan through banks is another Herculean task. Leave big loans, banks are not coming forward to provide differential rate interest (DRI) loans in Old City,” says Mohammed Turab, executive secretary of Confederation of Voluntary Associations (COVA). According to RBI guidelines, banks ought to grant DRI loans to BPL families for taking up small livelihood-related jobs. The amount is fixed at Rs. 15,000 and is repayable in 36 instalments, Mr. Turab adds.
As a result, small-time traders and entrepreneurs are forced to approach private financers and chit fund operators who charge exorbitant interest rates. “At times, they end up re-paying three times more than the loan amount,” says S.Q. Masood, a social activist.
Many feel the APSMFC should start new schemes to help small-time traders who require Rs. 5,000 to Rs. 20,000. “It is a Herculean task but not impossible. The authorities need to have the will power to implement such projects,” says MBT leader Amjadullah Khan. At present, the APSMFC provides bank-linked loans for various business ventures. It offers a subsidy of 30 per cent, and the rest is advanced by banks. However, it recently increased its subsidy share to 50 per cent to improve lending, thanks to failure to deliver much through the scheme.
But, time and again applicants have complained of hardship in availing the loans.
“People need small sums of money, and banks do not come forward to sanction it. In turn, people are approaching charitable institutions for financial help,” says Abdul Sattar, general secretary, Awaaz, a forum for development of minorities.