Micro finance institutions (MFIs) have expressed concerns about transparency issues when the ordinance is implemented.
The MFIs have sought some remedial measures for issues such as higher rate of interest asked by the banks to them, operational costs and loan recovery mechanism. Secondly, issues such as the capping of interest rates would also prove problematic as MFIs borrow funds from public and private sector banks at higher interest in the range of 12%-13%. Besides, there is 9% operational costs and the loan recovery process. However, MFIs felt a whistle blower policy is a welcome.
Padmaja Reddy, founder and MD, Spandana, said,“We do not have any details on the proposed ordinance. However, we are regulated by RBI and also go through extensive reviews by banks, who lend to poor borrowers through us.?
Sajeev Vishwanathan, MD and CEO of Bharatiya Samruddhi Finance, a flagship company of Basix, said any such move by the government for bringing transparency is welcome. “However, it should complement thework being done by the MFIs at large (Rs 10,000 crore of outstanding, touched 6 million households, and 99% repayment),” he said.
The Microfinance Institutions Network, a self-regulatory body of MFIs with 43 members, is in the process of appointing regional ombudsmen for customer complaint redressal mechanism.