Sensing foul-play in new products like loan for men and interest-free loans by microfinance institutions, Andhra Pradesh is all set to issue a notification to bring these products under the purview of the new MFI Act.
Sensing foul-play in new products like loan for men and interest-free loans by microfinance institutions (MFI), the Andhra Pradesh government is all set to issue a notification to bring these products under the purview of the new MFI Act.
Microfinance institutions in the state, whose going became tough after the introduction of MFI Act, are now finding new methods to carry on business by introducing fresh products like loans to males and interest-free loans, a senior
state government official said.
According to R Subrahmanyam, principal secretary (panchayat raj and rural development), some of the MFIs are offering loans to the husbands of women members of SHGs saying that extending loans to them will not attract the Microfinance
Act that came into being in December.
Some MFIs are mulling an option to extend interest-free loans arguing that they also will not come under the purview of the Act, he said.
"That shows the desperation. When you want to make hyper profit, then try to duck and try to find ways. We will not let it happen. A notification is being issued in day or two making it clear that these kind of loans will also come under
Microfinance Act," Subrahmanyam told PTI.
The Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, 2010 is aimed at regulating the sector in general by keeping tabs on the lending and recoveries of the MFIs in the state.
It prohibits MFIs from lending to the self help groups (SHGs) that are already covered by the formal banking system without seeking prior approval of the banks.
Share Microfin Limited, one of the largest MIFs in the country, recently launched a product by name 'Suraksha Loan' which is exclusively for male members.
Share Microfin, in its circular to its branches clearly, said that the loan has to be extended to a woman member of an SHG Group.
The circular stated that the loan outstanding will be nullified only in case of death, but not in case of suicide.
When contacted sources in SKS Microfinance said extending interest-free loans was just a vague idea and one of the 40-odd concepts the company is giving a thought.
"Even if they term those loans as interest-free loans or loans to males, all sections of the Microfinance Act will attract. It will be viewed as the loaning is done without following the Act. They will have the risk of getting registration cancelled and also liable for prosecution," Subrahmanyam said.
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