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Micro-credit no solution to poverty

I read the editorial, “Remedy worse than disease: Don’t kill microfinance institutions” (Opinion Page, Nov 22) and Sudha Ramachandran’s article, “No panacea for poverty: Suicides in AP demolish the myth of micro-credit” (Sunday Oped, Nov 21).

The Andhra Pradesh government’s ordinance on October 15 to regulate microfinance industry has put the industry in trouble. Industry’s woes are understandable. Crores of rupees are there in the market or with the borrowers. But what forced the state government to issue the ordinance? Only rogue microfinance institutions (MFIs) are responsible for it.

The MFIs were encouraged to free the poor borrowers form the clutches of the private moneylenders who used to overcharge the interest rates. They are also supposed to be the instruments of “socio-economic change” in rural areas. Needy people can set up enterprises to alleviate poverty. Self-help groups (SHGs) were helped to take up productive economic activities.

However, rogue MFIs brought a bad name to the industry. They are accused of charging hefty interest rates (up to 36 per cent) and using coercive ways to recover loans. Even suicides by some borrowers have been reported.

In fact, some greedy MFIs started exploiting the illiterate and poor borrowers by encouraging them to take loans even if they had no repaying capacity. In the absence of proper guidance to use the loans productively the borrowers always remained in the loan-trap. All the MFIs are not regulated by the RBI. Moreover, the MFIs failed to evolve any code of conduct for self-regulation.

There is a strong need to reform the system. The MFIs’ sole aim should not be “profit”. They are not supposed to make poor people poorer and totally helpless to sustain life. Ways and means should be devised to promote the real interests of the borrowers and the MFIs.

SUDESH KUMAR SHARMA,

Kapurthala

Where work culture is at its lowest ebb I read Rajan Kashyap’s article, “Making ministers, officers accountable” (Perspective, Nov 21). Years back, a young relative of mine got a government job. When I asked him about his job, he replied boastfully, “Oh, it is wonderful. There is hardly any work to do and I while away time in gossip, tea etc.” This is a sham and is possible only in a country like India where work culture is at its lowest ebb, particularly in public undertakings. The same people work hard and perform efficiently in the private sector or abroad. The Chinese, four decades back, were known as lazy opium eaters, but now have turned the tide, as most hard working and disciplined people, the reason of their frog leap in development in all fields. Their production level goes up when they go on strikes. Here, stalling or disrupting Parliament for days without transacting any business entitle them to full salary without work. The Results Framework Document (RFD) is a workable and essential tool, and Mr Kashyap’s suggestions merit a fair trial at the national level. In some education systems, students assess the performance of teachers and send it to the authorities. By and large, it is a score card of teachers who always continue to do their best. B.M.SINGH, Amritsar