Few month back incident of Andharpradesh, of suicide by poor people because of regress recovery process by one of MFI have shaken whole country to the extent that RBI has to intervene in between and finally Committee under most talented CA/Analyst come up with final report.
Some of Basic highlight of report:
- A borrower can be a member of only one Self-Help Group (SHG) or a Joint Liability Group (JLG)
- Not more than two MFIs can lend to a single borrower
- There should be a minimum period of moratorium between the disbursement of loan and the commencement of recovery
- The tenure of the loan must vary with its amount
- A Credit Information Bureau has to be established
- The primary responsibility for avoidance of coercive methods of recovery must lie with the MFI and its management
- The Reserve Bank must prepare a draft Customer Protection Code to be adopted by all MFIs
- There must be grievance redressal procedures and establishment of ombudsmen
- All MFIs must observe a specified Code of Corporate Governance
Someone have appreciated the recommendation, some has shown their discontent.
Though Committee have tried to focus and touch every aspect while forming this report, one of its important aspects has been missed out, which I think should be considered and would finally help in real rural upliftment.
I have worked in one of MFI for around 7 month and have seen the tears of such segment very closely. When we work on field, situation are very different and various problem arises of which Recovery is one of important issue. There is various levels of poverty and to be in safe side MFI just want to capture on those segment which are financially strong enough to repay and this create kind of shield for those segment who are really financially weak and need financial assistance. MFIs are given loan as priority sector for real financial inclusion to such segment but I would not sat 100% but most of the place it doesn’t happen, even if it happens, issues like suicide ,bad loan etc rises and the model of Social leader come under doubt.
Many times this raises questions like do we want MFI in the for what we are seeing it today or something different like body which is really for poor and who really want to short out these social evils. Though model is with everyone but more than 60% don’t follow it.
It is very much ironical that, these institutions has become so much money minded that targets are given in terms of Rs. This create kind of pressure on those field staff who are generally 10+2 or fresh graduate and too much needy of job to give loan to any that come in their way.
If we try and observe field bit more in depth, there are kind of people who take these services of MFI as there big advantage to them which is popularly known as MIDDLE MEN. These people form group, provide access to MFIs and in return charge interest from those people. They have form a kind of control on them to the extent that even if any MFIs field staffs tries to remove them out, they can’t because of following reasons:
Ø Fear among people that processing fee that are charged in advance, are whether they are giving it in genuine hand and whom to caught if it happens so .
Ø Since these people are generally illiterate, they are given kind of assurance that they will be with them in whole processing and help them in doing so.
Ø Place of meeting that has to be organised by MFI, 3-4 times., (though filed staff organise meeting to convenient of people only )
Ø Many times middle men also provide assurance that if money is not given by borrower, they are taking risk and in that case, though fund in given to every member of group, weakest member have to give his amount to leader, say middlemen or group/central leader, may be that member was joined in group for this member only.
Ø .Last but not least, Field staff to find it convenient in getting and achieving more than target at one place.
Though on paper, none of MFI allows middle men, which comes under social risk, but this is not true in most of the cases.
Do we really need MFI (present for structure)?
It is true fact that without strengthing our base, we can’t think of developed society but again question arises should we tolerate all these dark face of MFI or we need to improve present form.
I personally think its one of the best business model by YUNUS but has not been implemented in a way its was thought.
Many says its humorous to have profit and social development together and even doubt on MFI concept.
But its not true. Personally talking about Co. I was tagged with, policy and operation procedure is framed is such a way that if followed properly , such incident can never happen .
In spite of comparing with targets, performance should be judged with level of customer satisfaction and upliftment.
Every poor are not MFI customer, giving loans to certain section would result in putting more financial burden.
If right people is chosen (ethical values) at every level, pressure of targets is replaced with customer satisfaction and real upliftment and policies is followed precisely, occurrence of such cases can be controlled .Then country would reap real produce of this wonderful concept of MFI.
