This Article is From Oct 15, 2010

After 20 suicides, Andhra Pradesh to monitor Micro Finance

Hyderabad: Amjed hanged himself to death on Monday after he was unable to repay on time the weekly installment of Rs 570 on the Rs 24000 loan that his wife Kauser took from a Micro Finance Institution (MFI).

"Only because of the coercive methods used by the microfinance institutions, such incidents are taking place," said V Vasant Kumar, Rural Development Minister, Andhra Pradesh.

The Andhra Pradesh government believes over 20 such suicide deaths reported in the last two weeks are a fallout of high interest rates and coercive methods of recovery followed by microfinance institutions lending to women self-help groups.

The state government has now brought in an ordinance to ensure greater regulation and transparency in all transactions of MFIs. This requires:

  • Compulsory registration of MFIs
  • Declaring the effective rate of interest charged
  • No security to be sought for loans
  • And spells out coercive methods that should not be used for loan recovery
The Ordinance has not come a day too early. Even as it is collating the statistics of suicide deaths, the Andhra Pradesh government is only now starting the exercise of trying to find out how many people had borrowed how much money, from which MFIs. Interestingly, only five of the over 40 MFIs said to be operating in the state are registered with the RBI.