Budget disappointing for micro-finance sector: MFIN

Last Updated: Mon, Feb 28, 2011 11:39 hrs

The budget is a disappointing one for the micro-finance (MFI) sector and the Finance Minister could have done more than the few announcements which were made, the head of an umbrella body of MFIs-MFIN said.

"Overall it is a very disappointing budget from the MFI perspective...there are a couple of announcements but those are either old issues or very insufficient allotments," Vijay Mahajan, who is also the Chairman of the MFI, BASIX, said on Monday.

He said the budgetary announcement of creating a Rs 100- crore India Microfinance Equity Fund is barely sufficient for the sector and the amount announced is lower than what is required.

Similarly, the creation of Rs 500-crore Women's SHG's Development Fund is an "old story" which has been in the making since the late 1990s, Mahajan said.

"The FM could have announced making of a comprehensive legislation for MFIs so that states do not make their own laws," Mahajan said, referring to the imbroglio created by Andhra Pradesh promulgating an ordinance to regulate the MFIs.

Andhra Pradesh, the largest MFI market in India, had witnessed some instances of MFI borrowers committing suicide allegedly due to coercive tactics used by MFI collection agents which prompted the State Government to come up with the Act.

Mahajan said the raising of the target to Rs 4.75-lakh crore does not help MFIs as the money will be taken by medium and large farmers, which are not catered to by MFIs.

However, SKS Microfinance, the largest one and the first to be listed, welcomed the budget saying it "will augment the flow of credit to the sector" through various measures like increasing total farm sector credit target.