(The Opinions Expressed Here Are Solely Those Of The Author)
ONE FATAL FLAW IN MALEGAM COMMITTEE RECOMMENDATIONS:
A MAJOR THEME THAT FLOWS THROUGH MALEGAM COMMITTEE RECOMMENDATIONS:
Background To the Theme: There has been a major hue and cry in recent months and years about all the “horrible things” that MFIs have supposedly done. The fact that some large MFIs have struck it super-rich for their promoters and their private investors, has earned a lot of ill will for the microfinance sector amongst bureaucrats and politicians and other influential people in the country. As an aftermath of this, the Andhra Pradesh state problem in microfinance has been precipitated. It is in this background that the Malegam Committee had to come out with its recommendations. The Theme: The theme that flows through the recommendations is an apparent feeling of taking for granted, the near 100% repayment rates that MFIs have managed for several years. There is also a feeling of taking for granted, ready availability of microfinance facilities to the poor people. The recommendations, as a result, appear to be severely restrictive to the functioning of MFIs. To say that MFIs are being put in a straight jacket, would not be an exaggeration. In addition to the one fatal recommendation above, the recommendations raise a lot of very difficult operational questions, which are listed below. While the intentions of this committee are undoubtedly good, they seem to have completely dropped the ball in terms of understanding or providing for intricacies, complications, and challenges, of all the day to day operations. A Sincere Appeal: Let us not forget the abysmal repayment rates of IRDP of past years, low repayment rates of most government credit programs even today, all over the country. Even in Andhra Pradesh, a recent news report said, that the Government-run micro-credit program had repayment rates of 70% as of October 2010 and are falling. My sincere appeal is that near 100% repayment rates should not be taken for granted. Neither should credit availability for poor people, be taken for granted, regardless of any and all the government credit programs put together. Let our memories not be very short and let them not be selective either. Non- Government provision of credit is very important in the long run. It would be good to remove the fatal flaw in the recommendations and to substantially loosen the straight jacket that is evident throughout the recommendations. This would be in the interest of the poor people of India who genuinely need credit in the long term.
