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Microfinance takes a mega hit in AP………Mahalakshmi
The AP Micro Finance Institutions (Regulation of Money Lending) Bill, 2010, was finally cleared by the AP government on Tuesday late night, signalling victory for the rural poor. At least that’s what state authorities would like us to believe. The Bill, they say, is designed to protect the masses who bore the brunt of high interest rates adopted by various MFIs. The state women and child welfare minister Sunita Lakshma Reddy has categorised this as a victory for rural woman. According to her, women were exploited more by the MFIs. She says the MFIs had destroyed the SHG movement promoted by the state, with their high interest rates and greed for huge profits.
The new Bill is said to become a role model for other states, with AP contributing about 40% of the total operations of MFIs. It was passed amidst chaos in the Assembly, debated well past 9.30 pm and passed only after 10 pm. The main Opposition party Telugu Desam was not present in the Assembly when the Bill was passed as its legislators were suspended for a day, for having stalled the proceedings. TDP members were not in favour of passing the Bill and suggested a study be conducted by a select committee of the House before being made into law.
The passing of the Bill is a big blow for the Microfinance Institution Network (MFIN), a lobby body that tried hard to push amendments in the Bill. It had even hosted a dinner party for politicians from the state and central governments. But this did not yield any fruit.
AP had witnessed numerous farmer suicides in 2006 and the state government had come down on MFIs for multiple lending and high interest rates. But the story continued. Several of these farmers had taken loans from the MFIs. The issue took a drastic turn when SKS Microfinance, the only listed MFI in the country, dismissed its CEO Suresh Gurumani. Issues of corporate governance tumbled out and there was a big question mark raised over the nature of the operations.
In between, the MFIs threatened to shut shop in AP and instead expand in other states like Orissa and Chattisgarh. But those governments are also working on a similar Ordinance, following the AP model. The matter is currently sub-judice, with MFIN having filed a petition in the AP High Court against the Ordinance. The state is yet to file a counter to it. In case this doesn’t succeed, MFIN plans to approach the Supreme Court. Of late, there have been no credit disbursements.
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