Dec. 9: Microfinance Institutions Network (MFIN), a self-regulatory body of 44 top micro lenders, has asked the Andhra Pradesh government to put on hold the process for the enactment of an ordinance brought in to regulate microfinance institutions in the state. The body said MFIs may find it find it difficult to continue its operations in the state, if the ordinance is enacted into a law without any changes.
Though micro lenders have complied with the ordinance, MFIN chairman, Mr Vijay Mahajan, said on Thursday that there are provisions that make our operations in the state difficult and have requested the government to make certain changes in the ordinance. He, however, said the government appears to have decided on introducing a Bill in the State Legislature to enact the ordinance into a law without any modification.
“This development has come as a big surprise to us as we have had regular discussion with the government over certain changes required in the ordinance. We will not be in a position to continue with our operations in AP if required modifications are not made in the ordinance,” added Mr Mahajan.
Before enacting the ordinance, the body wants the government to study the report of the Y.S. Malegam Committee, which was appointed by the Reserve Bank to look into the MFI lending practises.
The ordinance imposes stringent conditions on lending and recovery of loans, which MFIs claim, are hurting their operations in the state.
Andhra Pradesh is the largest recipient of micro lending, attracting a one-third of the total MFI lending in the country. Any default in the state, Mr Mahajan claims, would seriously undermine the ability of MFIs to repay their bank debt.