Microfinance system, which aimed at providing financial empowerment for women at grass root level, was facing an attack with the emergence of a new form of usury, said speakers at a press conference organised on the sidelines of the ongoing Madurai Symposium here on Thursday.
M. P. Vasimalai, Executive Director of Dhan Foundation, the organiser of the development symposium, said that the microfinance sector was following two models based on demand and supply. The ‘demand model' was absorbed by microfinance institutions (MFI), which were operated on profits. He said that non-governmental organisations should play the role of a catalyst, instead of engaging themselves in lending.
The Dhan Foundation, he said, favoured the ‘supply model,' an enabling model, whose sole objective was poverty reduction. On the other hand, the demand model looked at only profits and hence the rates of interest, including hidden costs, were high. Unfair methods were adopted by these institutions to get back the money lent to the poor, he said and added that the Dhan Foundation favoured an Act, on the lines of the one in Andhra Pradesh, to regulate MFI. He alleged that the MFIs were destabilising the self-help group movement. Mr. Vasimalai said that there was a need to have an ombudsman for MFIs and to monitor their interest rates.
G. Pankajam, former Vice-Chancellor, Gandhigram Rural University, questioned the need for MFIs when people had easy access to banks. She wanted social audit done on the functioning of MFIs, which, she said, were acting as intermediaries between banks and beneficiaries.
V. K. Padmavathi, Chief Executive, Dhan Kalanjiam Foundation, said that the MFIs took to money lending as business. S. Akiladevi, coordinator, said that usury was taking a new dimension in lending through MFIs. They lured members of women SHGs by promising loans beyond their capacity to repay. This often resulted in dual and multiple membership in SHGs.
