The government will set up two funds of Rs 500 crore each to facilitate easy credit availability to the poor, Finance Minister P Chidambaram announced here on Tuesday while addressing a conference on microfinance.
“We have decided to set up two funds based on the recommendations of the interim report of the Financial Inclusion Committee,” Mr Chidambaram said. The two funds will be titled as Financial Inclusion Fund and Financial Inclusion Technology Fund, the Finance Minister said adding that the guidelines for operation of these funds are being worked out.

The Centre has already set up a Rs 100-crore microfinance development fund. Once the Finance Inclusion Committee, headed by Dr C Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister, submits its final report, the government will implement its recommendations, Mr Chidambaram said.

Government role
While dwelling on various issues relating to micro-finance, he admitted that there is not yet any clarity on the government role in the microfinance sector. “It is not yet clear what should the government do, what the government should not do. It is not yet clear what should the government regulate and what it should not,” Mr Chidambaram observed.

 He said the government had already introduced a micro finance bill in Parliament to regulate non-profit microfinance institutions.

Mr Chidambaram also said that though the goal of all microfinance institutions is the same that to provide credit to the poor, organisations operate on different principles. Such organisations, which operate for profits, want interest rates to be higher so as to recover the costs, he said.