The Hindu Business Line : Micro-finance growth

Apropos the article “Micro-finance needs regulated growth” (Business Line, January 3), unlike the US sub-prime crisis, precipitated by the reduction in valuation of houses as well as the borrowers’ inability to service the loans for lack of regular income, the amounts disburse to members of self-help groups (SHGs) are essentially mini personal loans, given with personal guarantee as well as group pressure as the USP for regular repayment.

The Government is also to be congratulated for diverting a part of the welfare subsidy through SHGs, where the chances of middle-men pocketing their quota of the Governmental assistance are relatively less.

Now the stage has come for the SHG group lending to graduate to a purposeful higher quantum of lending to those members who pursue a regular vocations to enable them to create business assets. But, simultaneously, the present model of purposeless lending should also continue for those who cannot pursue a regular vocation. Failure of the earlier IRDP model can be attributed to promoting a single pursuit like leaf making, basket making, tea stalls etc for contiguous groups, as the mere presence of more number of players in the same field led to non-viability of projects.

The graduated model of SHGs should avoid such mistakes and encourage their members to pursue different vocations to ensure sustaining the success of the calling selected by them.

The SHG model of financing can be extended to small and marginal farmers also to encourage more loans to the agricultural sector. This model can be replicated with villages as focal points for development to facilitate regulated rural growth.

P. E. Muthu Mumbai

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