The Cabinet of the Indian government has hammered out a debt-swap scheme to relieve self-help groups troubled by high interest rates charged on microloans and has approved a draft of an ordinance intended to end coercive collections practices by microfinance institutions (MFIs) in India.
Under the scheme, self-help groups would take out loans at lower interest rates from banks to pay off loans of higher interest from MFIs. The scheme is set up in response to news that some self-help groups are struggling to repay their loans.
On the other hand, the ordinance, which is in its final stages of approval, will make it mandatory for MFIs to register with the District Rural Development Agency, the main local government institution that oversees the implementation of anti-poverty programs, detailing their locations of operations, interest rates charged, system of conducting due diligence and means of securing repayment. Specifically, the proposed legislation will reportedly put an end to unspecified “coercive methods” to recover loans and threatens to put offenders behind bars for up to three years.
The Indian MFIs reporting data for 2009 to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, have an aggregate loan portfolio of USD 4.6 billion, total assets of USD 5.1 billion and 26.4 million active borrowers.
About the District Rural Development Agency:
The District Rural Development Agencies (DRDA) are the main local government institutions in India that oversee the implementation of anti-poverty programs. Set up under the Indian Societies Registration Act, the DRDAs are the organs through which certain government funds are distributed and programs are coordinated.
By Trevor Kwong, Research Assistant
Sources and Additional Resources:
[1] Source Article: The Hindu: Debt swap scheme finalized:
http://www.hindu.com/2010/10/15/stories/2010101555730100.htm
[2] Microfinance Information Exchange: India:
http://www.mixmarket.org/mfi/country/India
[3] MicroCapital Universe: District Rural Development Agency:
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=District+Rural+Development+Agencies
Browse the MicroCapital Universe and add your entry to the wiki at?https://www.microcapital.org/microfinanceuniverse/tiki-index.php
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