It has been observed that large number of microfinance companies have established in India. The CEOs of these microfinance companies think that they are the next Mohammed Yunus of India. They always say that India is a rich country but its people are poor. Therefore its important to uplift the poor people of India by sharing the richness. The Idea of microfinance is great in India but reality is far from the Idea. In real sense Poverty has literally become a big and organized business for Rich People to become richer. If you are educated, and looking for a profitable business enterprise and more so if you are a non-resident Indian and want to translocations to India and still make millions, micro-finance offers you the right avenue. You can also project yourself that you are the greates socialist and are doing great things by distributing the income among poorest of poor. If you go through the Balance sheets of microfinance company. There return on asset in almost 4 to 5 %.. 95 to 100% loan recovery. Interest spread is almost 8 to 10%. Such type of performance is not shown by other companies. The rate of Interest charged by the microfinance companies is 10 to 12% flat which is equivalent to 24 to 28% at reducing balance. How a poorest of poor can bear this exorbitant cost. Whereas Banks in India are charging 8 to 10% @ reducing balance in Housing Loan still many of us are not able to buy a house.
The idea of Microfinance was to empower the poor people and save them from clutches of Moneylenders/Mahajans/ Sahukaars,in many cases it has helped rural poor to come out from from the clutches of moneylenders/sahukaar . But nobody is thinking how a poor person can empower himself @ 25% rate of interest if big corporates think that they cannot empower themselves at PLR of various Banks and expect that their business can flourish only and they can provide good return to their share holder if they are lend @ 6 to 8%. The money which these corporates are uisng is not of their share holder but of the saving of common man of India who just get 4 to 8% retun on his saving. At least public sector Bank has not adopted that approach of looting the poor and have played great role in nation building and in implementaion of government sponsored scheme still they are the lowest paid in PSU's . Oriental bank had started its Grameen project in Dehradun in real sense in the line of Bangadesh Grameen Project. where SHG’s where formed and they were financed at @8.50% to 9.50% (PLR—2.50%) compared to 24% of microfinance company’s .
I thinks Government with the help of PSU Banks should come out to form a joint venture micro finance company and all government sponsored scheme should be routed through it even the payment of NREGA and Mid-daymeal etc should be formed. It is quite clear that private microfinance company cannot make the upliftment of poor people. They are making themselves richer by getting loans from Banks at cheaper rate for onward lending. There are various scheme of the Banks such as DRI advances (purchase of goat, hand cart,riksha) where rate of interest is just 4%. Just imagine iff farmers having lands face difficulty in repaying loan at 7% to the Banks, and committing suicide it is difficult to believe how a person who is not having any land holding can survive @ 24%. Neverthess, the micro-finance business has grown manifold in India Microfinance Report 2009 tells us that the portfolio of the micro-finance institutions has grown by 100 per cent, and number of beneficiaries have also gone up by 60 per cent. More than 15 crore people are already borrowing from Micro-finance institutions. What the report however does not tell us but is quite apparent is that this organised group of money-lenders is now beginning to take over the unorganized villains of the game — the sahukars or the traditional money lenders. It is high time for the people in charge to put checks and balances in these microfinance companies. I suggest traveling across Andhra Pradesh and Karnataka where microfinance companies are engaged in big way. You will observe that these poor people have taken loan from more than one micro finance companies and second to repay first so they are in vicious cycle of borrowing and there empowerment is impossible in this way. There has been no change in living standard of these people.
