A recent press report said that Self-help groups (SHGs) across the country will henceforth get loan at 7 per cent on a par with the crop loans.
Mr. Jairam Ramesh, Minister of State for Environment and Forests, said that microfinance has unfortunately become a dirty word now largely due to extreme commercialization by some MFIs, particularly those in Andhra Pradesh.
He said that the microfinance model adopted by India was different from what was practiced in Bangladesh. The focus in India is on bank-linkage programs rather than lending to joint liability groups. He also said the projected microfinance bank by the Andhra Pradesh Government is likely to get assistance of Rs 500 crore announced in the Union Budget in February.
The main challenge for Government agencies was to repeat the efficient good work done by MFIs in some areas. Mr. Ramesh said that the financial products for the Self Helped groups are bank driven which is an inbuilt limitation of the bank-linkage program. He said that Andhra Pradesh should follow some of the innovation done by MFI and expand the financial product menu. He said that the MFI regulation for the state was necessary and is expected to have a positive impact on the industry.