The Hindu : Andhra Pradesh / Visakhapatnam News : Collector urged to rein in micro finance institutions

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Saturday, Nov 21, 2009
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Andhra Pradesh

Andhra Pradesh - Visakhapatnam

Collector urged to rein in micro finance institutions

Staff Reporter

Self-Help Group members are being lured and harassed later, say AIDWA leaders

Photo: C.V. Subrahmanyam

Members of AIDWA staging a dharna at the Collectorate in the city on Friday. —

VISAKHAPATNAM: The All India Democratic Women’s Association (AIDWA) has appealed to the district Collector to restrain micro finance institutions (MFIs) that are allegedly harassing poor borrowers.

AIDWA representatives and affected persons staged a dharna at the Collectorate protesting against the micro finance institutions that were luring Self Help Group (SHG) members to borrow loans and harassing them if the weekly repayment was delayed even by a single day.

The institutions are extending loans between Rs.5,000 and Rs.20,000. If a member borrows Rs.15,000, she has to pay Rs.365 a week for 50 weeks. The amount of interest works out to Rs.3,250. This apart, the borrower also has to shell out Rs.365 as bank charges and Rs.60 and Rs.150 towards insurance, according to AIDWA city secretary B. Padma and district president M. Sujata.

If any member fails to repay the instalment amount for any reason, the remaining members would have to repay the same. The financiers were throwing out utensils from the houses of the members if there was any delay in payment. They alleged that the SHG members were also being abused.

The AIDWA leaders said that the SHG members were being thrown into a debt trap, as they were borrowing more loans to repay earlier loans. This was forcing some of the members to commit suicide.

Compound interest

They also alleged that some local women were encouraging the formation of SHG s and inviting micro finance institutes and were running away with the loans granted to the members. The institutes were pressurising the members to repay the loan taken.

They alleged that the micro finance institutes were taking loans from commercial banks and advancing the same to SHG members at compound interest.

The AIDWA leaders sought measures to check the excesses being committed by micro finance institutions and initiate steps to advance loans through the DRDA.

Corporator B. Eswaramma also participated in the dharna.

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