Microfinance institutions hope for level playing field in new Bill

Font Size

Print

Feedback

Email

Discuss

• Discount UK Shopping

Related Articles

Female bosses get thumbs down from shareholders

Chennai: The microfinance institutions (MFIs) are awaiting the microfinance legislation based on the Rangarajan committee recommendations which is expected to give them a ‘level playing field’ and recognition as a separate group of non-banking financial institutions.

The Bill on microfinance is expected to incorporate some of the key recommendations of the Rangarajan committee on financial inclusion such as different status for microfinance institutions as ‘Microfinance NBFCs’, with easier norms and access to foreign funds and tax concessions similar to housing finance and infrastructure firms.

S Dilli Raj, CFO of the Hyderabad-based SKS Microfinance Ltd, said the MFIs were not asking for any subsidy or concession but a level playing field. The MFIs have reached millions of households which the banking sector had shunned and have been transforming lives and communities.

He said SKS is present in 19 states and has disbursed Rs 10,538 crore for income generating non-farm operations through 1,698 branches and reached out to 54 lakh households in 62,000 villages in the country and is expanding its network to Tamil Nadu. The company operating in Vellore and Krishnagiri districts in Tamil Nadu would open 25 branches in the first year, Dilli Raj, told a press conference here on Friday.

He said in Tamil Nadu over 1.5 crore people live below poverty line with a credit support requirement of Rs 7,502 crore. "Only 10% of this has been covered as yet," he said. SKS was targeting to narrow the huge gap, he added. SKS provides 50-week loans for income generation. In the first year a member could borrow up to Rs 16,000 and get a further incremental loan of Rs 4,000 every year.

Dilli Raj said, "The loans attract an interest rate of 15%. They have an insurance cover for the duration of the loan. The loans are repaid every week at the centre meeting held near the member's residence."

SKS also offers its members `Swayam Shakti Suraksha', a micro insurance product jointly with Bajaj Allianz where the member pays Rs 20 a week and at he end of five years gets Rs 5000. In case of an accidental death, the nominee of the member gets Rs 10,000.

"As an affirmative action SKS recruits its staff from the same social background that it serve," he said. Now the company has over 18,200 employees. Of this over 90% are field staff.