Micro-finance institutions (MFIs) are not going to solve India's poverty problems, but they could be an instrument in bringing people to the web of financial services, the Union Minister for Rural Development, Mr Jairam Ramesh, has said.
“They (MFIs) are not answers to poverty alleviation and certainly not the panacea they like to see themselves as,” Mr Ramesh said after releasing a NCAER-CMCR study on “Assessing the Effectiveness of Small Borrowing in India” here on Monday.
He highlighted that the findings of the study does not provide a robust enough defence of MFIs vis-a-vis the self help groups (SHGs).
The real comparison of MFIs should be with money lenders (informal sector) and not SHGs, he noted.
Mr Ramesh expressed confidence that the country would, in the coming months, have a good regulatory system governing MFIs — a system that appreciates the role of such institutions.
“There was hype governing some of MFIs. They set out to claim that they are solving India's poverty problems. If they were modest in their ambitions, the vehemence with which their critics struck back would have been even much lesser… vehemence of backlash was directly proportional to the exaggerated nature of the claims of many of these institutions,” he said while referring to the recent fracas in the functioning of MFIs in Andhra Pradesh.