Micro credit and the financial system

.....The ordinance of Andhra Government is quite explicit. " Where as these SHGs are being exploited by private Micro Finance Institutions ( MFIs) through usurious interest rates and coercive means of recovery resulting in their impoverishment and in some cases leading to suicides…." The engagement of MFIs with borrower was shallow based on " touch and move on" business models, shorn of any development content. The small loan size and short duration of the loan do not enable most borrowers to do much except to ease liquidity problems. That is why Dr.Y V. Reddy, former Governor, RBI stated that Microfinance is India's subprime. " Ultimately, it is something like subprime lending": In fact there is evidence to show that profit- making MFIs were encouraging what were called " NINJA" loans - no income, no job and no assets - in the American financial crisis of 2008.......

Read - FPJ