<p>The plight of microfinance borrowers in Karnataka is deeply troubling, with three suicides linked to harassment by recovery agents being reported within a short span. <a href="https://www.deccanherald.com/tags/microfinance-institutions">Microfinance Institutions</a> (MFIs) were created to provide financial support to the poor for critical needs like health and education, and weddings. However, the reality today is starkly different. Multiple lending, often to individuals who cannot repay, has become a norm.</p>.<p>In many cases, borrowers have been pushed into over-indebtedness, taking loans from various companies that far exceed their repayment capacity. Many MFIs are indulging in unethical practices by blatantly flouting the Reserve Bank of India (RBI) guidelines by disbursing loans exceeding Rs 2 lakh per borrower, further pushing borrowers into a debt trap. Coercive recovery tactics, including threats and intimidation, are rampant in the microfinance industry. Many MFIs employ recovery agents with dubious backgrounds who pressurise not only the borrowers but also their guarantors. For many, this has led to financial desperation with some feeling there is no escape from this humiliation other than suicide.</p>.<p>Opposition leader R Ashoka has alleged that the government’s delay in disbursing loans under various schemes had forced people to borrow from MFIs. The government had released only Rs 643 crore out of the Rs 1,700 crore meant for corporations, resulting in a deficit of Rs 1,057 crore. This gap, according to him, was bridged by MFIs, leading to the present situation.</p>.Immediate action on complaints against harassment by microfinance firms: Karnataka CM Siddaramaiah.<p> Chief Minister <a href="https://www.deccanherald.com/tags/siddaramaiah">Siddaramaiah</a> has now promised stringent action, and has announced plans to promulgate an ordinance to regulate and crack down on erring MFIs. Deputy Commissioners have been instructed to act on complaints and helplines have been set up for borrowers to report harassment. The response is welcome, though belated. Ideally, routine monitoring of MFIs and their agents should have been a standard practice, preventing the situation from escalating to a crisis.</p>.<p>The problem stems from a systemic failure: inadequate borrower protection and insufficient oversight. MFIs in their pursuit of profit have abandoned the core principles of microfinance. While the goal of microfinance is to empower, the truth is that many borrowers are trapped in debt and despair. The RBI and the state government must take stronger action to protect the vulnerable from these exploitative practices by ensuring that MFIs operate within ethical and legal bounds. They must act swiftly before more lives are ruined. Microfinance should be a lifeline, not a burden that pushes the poor deeper into poverty.</p>
<p>The plight of microfinance borrowers in Karnataka is deeply troubling, with three suicides linked to harassment by recovery agents being reported within a short span. <a href="https://www.deccanherald.com/tags/microfinance-institutions">Microfinance Institutions</a> (MFIs) were created to provide financial support to the poor for critical needs like health and education, and weddings. However, the reality today is starkly different. Multiple lending, often to individuals who cannot repay, has become a norm.</p>.<p>In many cases, borrowers have been pushed into over-indebtedness, taking loans from various companies that far exceed their repayment capacity. Many MFIs are indulging in unethical practices by blatantly flouting the Reserve Bank of India (RBI) guidelines by disbursing loans exceeding Rs 2 lakh per borrower, further pushing borrowers into a debt trap. Coercive recovery tactics, including threats and intimidation, are rampant in the microfinance industry. Many MFIs employ recovery agents with dubious backgrounds who pressurise not only the borrowers but also their guarantors. For many, this has led to financial desperation with some feeling there is no escape from this humiliation other than suicide.</p>.<p>Opposition leader R Ashoka has alleged that the government’s delay in disbursing loans under various schemes had forced people to borrow from MFIs. The government had released only Rs 643 crore out of the Rs 1,700 crore meant for corporations, resulting in a deficit of Rs 1,057 crore. This gap, according to him, was bridged by MFIs, leading to the present situation.</p>.Immediate action on complaints against harassment by microfinance firms: Karnataka CM Siddaramaiah.<p> Chief Minister <a href="https://www.deccanherald.com/tags/siddaramaiah">Siddaramaiah</a> has now promised stringent action, and has announced plans to promulgate an ordinance to regulate and crack down on erring MFIs. Deputy Commissioners have been instructed to act on complaints and helplines have been set up for borrowers to report harassment. The response is welcome, though belated. Ideally, routine monitoring of MFIs and their agents should have been a standard practice, preventing the situation from escalating to a crisis.</p>.<p>The problem stems from a systemic failure: inadequate borrower protection and insufficient oversight. MFIs in their pursuit of profit have abandoned the core principles of microfinance. While the goal of microfinance is to empower, the truth is that many borrowers are trapped in debt and despair. The RBI and the state government must take stronger action to protect the vulnerable from these exploitative practices by ensuring that MFIs operate within ethical and legal bounds. They must act swiftly before more lives are ruined. Microfinance should be a lifeline, not a burden that pushes the poor deeper into poverty.</p>
