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Regulatory regime soon for micro-credit: Chidambaram

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Kinnigoli (Dakshina Kannada) , Nov. 28

THE Union Finance Minister, Mr P. Chidambaram, has said that the Government is working on a regulatory mechanism under which a part of the total credit available in the Indian financial system will be made available to micro-credit.

Launching 1,503 self-help groups (SHGs) - promoted by the Sri Kshetra Dharmasthala Rural Development Project (SKDRDP) and Corporation Bank - at Kinnigoli in Dakshina Kannada district on Sunday, Mr Chidambaram said, "I am confident that very soon I will be able to announce a regulatory regime under which every bank and every financial institution will be required to set apart a part of the total credit to be lent through NGOs and through micro-credit organisations. We will have regulations by which the money must go to micro-credit institutions, and through them it must go to the poor people."

He said that banks could not directly lend to the rural poor because it has no direct contact with them. The bank will lend money to NGOs such as SKDRDP. These organisations will then identify the beneficiaries and lend money.

Mr Chidambaram said that the Government is emphasising on micro-credit because the borrowers are honest in this case. "In fact our experiences show that recovery rate from SHGs is almost 100 per cent," he said.

The Government wants to enrol women and men in the SHGs, he said, adding, "We want you to save and lend among yourselves." In the second round, the banks will begin extending credit to SHGs.

Stating that poor people have a sense of honour, responsibility and pride, he said when they take a loan they are determined to return it.

He said there is a need to put an end to the misconception that poor people are not creditworthy. "I have no hesitation in declaring poor of India, especially those living in villages, are as creditworthy, in fact, they are more creditworthy than the richest business people in India," he said.

While rich people can easily borrow Rs 1,000 crore, a poor man cannot borrow Rs 1,000. Somehow the rich are considered creditworthy, the poor are considered not creditworthy, he said.

The Minister said that one of the reasons for Indira Gandhi nationalising banks was to take them to the villages and to poor people. Her intention was to offer credit to them. Thousands of branches of banks were opened in rural areas.

Her vision was partly successful, and to succeed it completely credit should be given to the poor, he said. Today a poor family borrows from the moneylender. The moneylender charges a very high rate of interest. As farmers cannot pay back that interest, many of them commit suicide because they cannot bear the shame.

All that must change. "Our credit institutions, particularly banks and cooperative institutions, must give credit to the poor people. We have found that the micro-credit is the best way to reach credit to the poor people," he said.

Terming gender inequality as the worst one in society, he said this inequality could go only by empowerment of women. True work of women can be recognised only if they come and work together, and produce goods and services.

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