Andhra rural poor continue to fall for predatory MFIs

His wife Zakia Sultana rues the day when Waheed left home for the free drink. "My husband took a loan of Rs 15,000 on my name. It was very easy. There after he took four more such loans. He had to pay Rs 450 of interest per loan every week," the mother of two daughters and a son told Deccan Herald.

Sitting in front of a small tenement in Yennepalli village, about 70 km north west of Hyderabad, Sultana said the family finally caved in by the debts when her daughter fell ill and husband went into a drinking bout. "He had to borrow from the money lender to pay off the MFI agents who would trail him round the clock even while he was pushing the cart. They would follow him home if he failed to cough up the instalment," she said.
Sultana still has no idea of the number of loans her husband had taken. On May 12, Waheed woke his 10-year-old daughter and told her he would hang himself. Little did Sania know that he was serious.

In another case of unscrupulous lending, four MFIs had given over Rs 1 lakh to agriculture labourer Lakshmi at Godaguda, 7 km from Vikarabad town.  Lakshmi's second daughter  Lalitha ( 16), an intermediate student, consumed  DAP on October  8, when she was summoned  by MFI bill collectors and made to part with Rs 220 kept for  payment of examination fees .

In her suicide note, Lalitha had pleaded with her parents not to take loans from the MFIs any more. With one acre of land  and a dilapidated home , Laxmi was the only source of livelihood for  the family  but the MFIs ( Spandana, SKS, Basix and  L&T)  together gave  them loans worth one lakh  in just  one year.

B Rajasekhar, CEO of Society for Elimination of Rural Poverty, says that operations of the MFI are a coercive activity. "Their business model of weekly payment exposes their intent of profiteering as no where in rural India collection is on weekly basis," he said.

He also blames the MFIs for hijacking the rural infrastructure for women empowerment promoted by the government over years for their profiteering.  Seventy-five suicides down the line and stringent guidelines by the state government apart, the micro finance industry in Andhra Pradesh is still way behind their target of recovering their loan portfolio among 1.09 crore rural women.

However, Vijay Mahajan, President of the MFIN, points out that the 44 MFIs have been able to recover only 15 per cent of their outstanding of Rs 7,500 crore after the promulgation of the Micro Finance Institutions Ordinance by state government in October.