Microfinance firms fear Andhra law will hurt them

The MFIN, which represents 44 micro-finance companies registered with the Reserve Bank of India,  said the bill would create further hurdles for legitimate companies in providing access to finance for the poor.

The state assembly late Tuesday night passed a bill to regulate micro-finance firms in the state.

The Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Bill, 2010, would replace the ordinance issued by the government Oct 15 following a spate of suicides by many small  borrowers.

The government then said it had to bring the ordinance after 75 borrowers committed suicide during the last few weeks due to harassment by MFIs.

The MFIN, in a statement here, said it was expecting that the  government would incorporate amendments suggested by it.

"We, in turn, expect the government to now ensure that the MFIs can conduct their business without fear of harassment, arrests and  motivated obstruction to their normal business activities.

Any move that can cause long term damage to micro-finance sector will serve  nobody's interest, least of all the poor, who have very few viable options to seek loans," said Alok Prasad, CEO of MFIN.

"This bill as approved by the state assembly will create further  hurdles for legitimate RBI-registered micro-finance in providing access to finance for the poor," he said.

"The issue of unavailability of credit to 97 lakh borrowers and outstanding loans of Rs.7,500 crore is looming large before the industry, and passing the bill without required amendments will have a significant impact on the ability of micro-finance institutions to function smoothly."

MFIN said its members were in constant dialogue with the state government officials and there were expectations that the suggestions made by them would be incorporated in the bill.

"Since the bill and  the ordinance are identical, the on-the-ground operating realities remain unchanged," MFIN statement said.

MFIN members had requested amendments to a few provisions or, alternately, for the government to refer the bill to a house committee for debate before being passed.