Microfinance System

Photo by Amit Haralkar

Book-keeping time MFIs have faced complaints of putting undue pressure on borrowers

At a micro-finance institution for village women

Ajit Solanki

Bandhan’s founder Chandra Shekhar Ghosh

Sandipan Chatterjee

Photo by Arindam Mukherjee

Loan melee Villagers at an MFI meet


Union Finance Minister P Chidambaram with Lise Grande, UN Resident Coordinator and UNDP Resident Representative in India, and Chairman, CII Taskforce on Financial Services, M V Nair during the inauguration of Microfinance India Summit 2012 in New Delhi.

PTI Photo/ Kamal Singh

Vested interests A microfinance meeting on the outskirts of Hyderabad

Reshma Chavan, 43 She owns a shirt-making factory in Mumbai and is entirely dependent on seasonal wholesale orders. Her inability to repay her loan from the MFI has left her with inadequate funds to expand. Without direction, her access to organised credit means little to her.

Dinesh Parab

Big Reach: Akula at a village SKS covers

Nilotpal Baruah

“We are in a tight squeeze and don’t know how to repay the money. Some of us have sold the buffaloes to repay the loan.” Naresh Chand (left, foreground) Jeevana village, Muzaffarnagar Naresh Chand rues the day he took microcredit to buy buffaloes. In 2006, the Punjab National Bank first made credit available to his 10-member self-help group. Prompt repayments helped get Rs 2.90 lakh to buy cows and buffaloes. “We paid back Rs 1.29 lakh. We stopped when the government started a loan waiver, which we did not get. Now, the bank has served notice to repay Rs 5.51 lakh,” he says.

“Both banks and microfinance people want a shop address before they sanction a loan. How do I get that?” Kanu Das, Calcutta Kanu Das, 35, a garment hawker in Calcutta’s busy Gariahat market, doesn’t believe in microfinance schemes from nationalised banks or mfis. “These schemes are worthless. They want a shop address before sanctioning loans. How do I get that?” he asks. So this Durga Puja season, Kanu went to the local moneylender for the Rs 30,000 loan he needed for procuring stocks. Now he needs to pay Rs 800 a month. “There is no pressure to pay back every week, something mfis insist upon,” he says.

Sandipan Chatterjee

“Banks make you feel really small...the attitude is you will run off with the money and never pay back.” Ripan Sarkar, Siliguri When Sarkar thought of starting his artificial flowers kiosk in Siliguri, he approached banks for a loan, but found their eligibility criteria impossible to meet. “I had no proof of permanent residence,” says Sarkar, whose family migrated to Siliguri from Assam. So he joined a private loan scheme called Bandhan by depositing Rs 1,100 as security for Rs 10,000 borrowed with full repayment in 45 weeks. “You would end up paying about Rs 2,000 as interest, which is better than the documentation headache.”

Sandipan Chatterjee

“The constant hounding and abusive language are getting too much. I sometimes feel death alone will offer me respite from this hellish loan cycle.” Bouthu Swarnalatha, Warangal A farm labourer, Swarnalatha is one of many in Seethampet village of Warangal district who sometimes contemplate suicide. Hounded regularly for falling behind on repayments for the Rs 15,000 she had taken from an MFI, Swarnalatha says she can’t afford to repay the weekly instalment as her daily earnings are not even sufficient to meet her needs.