Some disturbing links about Micro-finance Institutions (MFIs) recently:
- TOI: Microfinance Agents kidnap a 10-year-old girl to punish mother for default.
- AP’s Human Rights Commission seeks reports on MFI induced suicides.
- AP to introduce Microfinance ordinance to regulate MFIs
Responding to a chorus of complaints over a spate of suicides in the state allegedly due to pressure from microfinance firms, state government officials, including the chief minister, on Tuesday, threatened action in the form of a law. “The state government will soon bring an ordinance to control microfinance institutions,” chief minister Rosiah told reporters in New Delhi. “The government has started taking the opinion of legal experts and from the Attorney General ,” he added.
We don’t know what kind of regulations there will be but it’s likely to have an interest rate cap, limited recovery options and will impact 40% of the MFIs in the country (that many operate in AP).
- At the same time, the banking secretary R. Gopalan says there is no plan to cap MFI interest rates.
- SKS Chairman Vikram Akula says ‘interpersonal issues’ were responsible for Suresh Gurumani’s getting fired from the CEO post recently. The Stock hasn’t done all that well since.
The industry’s under threat; microfinance is necessary but obviously not under these circumstances. The bigger deal will be when people just stop paying – either as a revolt or simply because they can’t. Handling that, for an industry born in a boom will be essential.
