Need for regulation in MFI sector to grow: Sikkim MP PD Rai

source:isikkim

Speaking during a conclave on Microfinance Institutions (MFI) last week at the Mint Conclave in New Delhi Sikkim’s sitting Loksabha MP Prem Das Rai ( P D Rai) who is also member of the parliamentary standing committee on finance said that there is a need for regulation in the MFI sector to help the sector grow. Mr. Rai said, “…there has been some amount of not-so-good players in the industry.” He said that the industry faces a serious threat to its very existence Rai and the government should bring in new regulations to make the sector work.
The conclave was organised as a part of Mint’s Clarity Through Debate on the topic “Microfinance-Promise, Performance, and Prognosis.”
Without directly crediting the MFI Mr. Rai said, “”We have 120-crore population and a substantial portion of this lives below the poverty line. There is a huge deficit of deploying capital to those who really need it. Microfinance companies were going to this space.”
The MP said, “Today, we have actually driven the poor back to the money lenders. We have a situation that the real problem of poverty alleviation, or inclusive growth, or ways and mechanism to reach out to poor is not working.”
Speaking on the condition of MFI in the northeastern states Rai said, “In the North-East, we still have a credit-deposit ratio of less than 30% in most of the states. This means the portion of credit available compared with the deposit mobilization is less. The deposits then moves away from them to other places.” The MP stressed that there was a need to look at the whole issue of microfinance sector afresh.
Rai further said, “In the North-East, there is demand for credit but the supply side remains an area of concern. They are not being served well by the banking industry and any other financial institution. They need to struggle even to get even 10 crore or 20 crore.
After the crisis of bad debts in Andhra Pradesh that struck the microfinance sector MFIs have shrunk from Rs 30,000 crore to half of it. Andra roughly accounts for one- fourth of the industry.
The other participants included K.P. Krishnan, secretary, economic advisory council to the Prime Minister; Jayanta K. Sinha, chief general manager (rural business) State Bank of India; Jennifer Isern, regional manager, access to finance, IFC; Samit Ghosh, chairman, Ujjivan Financial Services; and Alok Prasad, CEO, Microfinance Institu- tions Network, were the panellists.
The debate concluded on the note that there was a need of responsible lending.
In Sikkim, the microfinance industry remains underdeveloped. In 2009 the then RBI governor D.Subbarao during one of his visits to Sikkim had said that there was a need to fill the gap in financial inclusion.
MP P D Rai has been at the forefront of making Sikkim financially more inclusive. Himself an alumnus of IIT Kanpur and IIM Ahmedabad (MBA) Rai was awarded the prestigious Eisenhower Fellowship (USA) for his contribution to Sikkim’s economic and industrial growth. He also served as the Deputy Chairman of the State Planning Commission in the Government of Sikkim. Apart from holding a host of responsibilities at state, national and international level P D Rai also served as the CEO (Northeast) of BASIX, one of India’s largest microfinance and livelihood promotion institutions. He implemented microfinance initiatives for Sikkim and other NE states by working with farmers, villagers, and non-governmental organizations during his term at BASIX.