Waiving of Micro-finance Loans May Be Bad for Assam's Economy: Experts
At a time when the Assam Government has set different criterion to waive micro-finance (MF) loans to the tune of more than Rs 12,000 crore.
GUWAHATI: At a time when the Assam Government has set different criterion to waive microfinance (MF) loans to the tune of more than Rs 12,000 crore, economists and those associated with the running of financial institutions have warned that such development might be a bad precedent for the future economy of the State.
Financial experts have also cautioned Dispur that blanket waiving will also drive away lenders to give loans for various purposes in future. Altogether 26 lakh female borrowers took MF loans in the recent year. The total outstanding loan amount dues till this date stand at around Rs 12,500 crore (both principal amount & interest).
Waive Off Micro-finance Loans
Noted Economist Amiyo Kumar Sharma told The Sentinel that agriculture loans have been waived in many Statues of the country and it has almost become an election gimmick. In MF too, the political parties used it for attracting voters.
"The local issue of harassment of borrowers by the MF agents was blown up to get the attention and participation of the whole State by the political leaders. Demand for the prevention of harassment was transformed to a promise of a loan waiver. Once Assam starts to waive MF loans, there will be demand in other States too. So, Assam has to do a good job. The committee set up by Dispur to look into the issue can seek expert advice from outside the State too. Well known leaders from an organization like BASIX, SEWA, MYRADA etc can be requested to give their suggestion," Sharma said.
According to Sharma, the government has to hold in-depth discussion with the representatives of microfinance institutes (MFIs) and borrowers to reach a consensus on loan waiving. He said the government could waive only the interest amount and enable the borrowers to pay the principal amount by creating various income avenues for borrowers.
"The income criterion for eligibility of the borrowers for a waiver needs to be studied too. A family income of Rs 1 lakh per year is too meagre to consider the family well off. But a family having a car is not poor. All these details have to be studied to decide on eligibility criteria. Poor but regular payees need to be awarded too," Sharma who is also the Executive Director of Rashtriya Gramin Vikas Nidhi (RGVN) said.
He urged the State Government to help the local MFIs to avail loans at a low rate of interest so that these institutes do not charge exorbitant interest from the poor borrowers.
Managing Director & CEO North East Small Finance Bank Ltd Rupali Kalita said a majority of the people in the State have a wrong perception about MFIs. She said the people consider MFIs as huge profit earners by charging exorbitant interest from poor borrowers.
"Such perception is completely wrong. The government should come forward to correct such perception and make MFIs to significantly help in the growth of the State's economy," Kalita who is closely associated with the MF sector in the State.
Alok Misra, CEO & Director at Microfinance Institutions Network (MFIN) even if the Assam Government waives the entire microfinance loans of Rs 12,500 crore and pays the institutions on behalf of clients, it will have a serious financial impact on the State's economy.
"It will give rise to a similar demand from other segments like retail loans etc. The distinction between stressed clients and willful defaulters will be lost. With dent to credit culture and anticipation of future such announcements, financial institutions might go slow in lending, further exacerbating the situation," Misra said.