AP seeks bar on MFI funding
Dec. 16: The war of words between the Andhra Pradesh government and microfinance institutions (MFIs) got further intense, with the former writing to an RBI panel to discourage profit-driven lenders. The Andhra Pradesh government on Thursday asked the Y.H. Malegam committee to bar MFIs from raising funds from stock markets and private equity.
The panel was set up by the RBI to look into microfinance issues after the AP government issued an ordinance in October to regulate microfinance institutions in the state. The Malegam Committee was in the state on Thur-sday to take the views of all stakeholders. Microfinance Institutions Network (MFIN), however, called the government’s stand as unbalanced.
“The Andhra Pradesh government has been taking an unbalanced view without considering the good work done by the MFI sector. We are confident that the Malegam Committee’s final report would lead to a healthy structure for the sector,” said Mr Alok Prasad, the chief executive officer of MFIN.
Emphasising the need for tapping funds from social investors, the government has also reportedly pointed at that the investment of private equity funds has turned microfinance institutions into profit-driven companies, defeating the very purpose of financial inclusion. The government blamed SIDBI and other banks for the present crisis as they lent money to MFIs without monitoring their activities.
In its report, the government has also sought a cap on interest rates charged by micro lenders at eight per cent. The finance minister, Mr Pranab Mukherjee, however, had ruled out imposing an any cap on interest rates charged by micro lenders, which could potentially kill the sector.
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