He was speaking at a one-day seminar on ‘Financial Inclusion in Karnataka’ organised by the Federation of Karnataka Chambers of Industry and Commerce (FKCCI) in association with AKMi on Thursday.
“The unorganised sector is often called inefficient. It is not so, the poor have to survive by paying astronomical rates of interest for relatively small amounts of money like Rs 2,000 or 5,000 or even Rs 500 and they still manage to live,” said Rao, stating that the government instead of focusing on creating loan options for these people has trained its sights on getting FDI in retail into the country. He also suggested introduction of occupational organisations which would be able to provide guarantees for borrowers and a credit rating system for rural population which would solve the repeatedly asked questions of trust.
Rubbishing claims of low returns from micro-finance lending, he stated that the default percentage of loans in the industrial sector is much higher than micro financing.
Dharmadhikari of Dharmasthala Dr Veerendra Heggade, speaking at the inaugural ceremony said, “Efforts of the government today are in philanthropic activities. It is resulting in a handicap for people when they are made to face competition. I request the government to make a special study on contributions of micro-finance institutions (MFIs) on rural growth and take NGOs and micro-finance institutions aboard as partners,” he said adding that the government decision to offer loans at as low as 1 per cent interest is affecting MFIs adversely.
He also called beneficiaries of MFIs to be more responsible with their borrowing by showing detailed plans of their investment instead of just plain borrowing. “They must be able to borrow money for any reason long as they can explain it. They should not be made to lie,” he added.
FKCCI president J R Bangera, asked the government to exempt the micro-finance sector from the State Money Lenders Act as the sector is being efficiently governed by the Reserve Bank of India.He also advised the toning down of the National Rural Employment Guarantee Act and shifting of funds as seed money to micro-finance institutions.