Thaindian News

Hyderabad, June 21 (IANS) In an attempt to protect women’s self-help groups (SHGs) from exploitation by micro-finance institutions (MFIs), the Andhra Pradesh government proposes to set up a non-banking finance company with a corpus of Rs.400 crore.

Chief Minister N. Kiran Kumar Reddy Tuesday said the proposed NBFC would address the credit gap and meet the emergency requirements of SHGs.

Addressing an international summit on “Microfinance and Inclusive Development”, he urged the central government to provide over Rs.100 crore to the proposed company. Two to three banks and mandal samakhyas or federations of SHGs will also be equity partners in the project.

As SHGs are approaching MFIs to meet the emergency requirements of credit and thus becoming vulnerable to their exploitation in the form of very high interest rates, the government has come out with the idea of the NBFC.

Indira Kranti Pathams (IKPs), as SHGs are known in Andhra Pradesh, will get loans at reasonable rates from the proposed NBFC, which will be in addition to the existing “pavala vaddi” scheme of the state government under which it is providing credit to IKPs at three percent.

Kiran Kumar Reddy said he was trying to fund ways to further reduce the rate of interest.

Union Environment and Forests Minister Jairam Ramesh suggested that the National Bank for Agriculture and Rural Development (NABARD), the state and central government and SHGs can all contribute Rs.50 crore each for NBFC.

He pointed out that the union budget had already proposed a separate financing window with an initial corpus of Rs.500 crore. He hoped that over a period of time it will become a national bank for SHGs.

The state government’s subsidy for credit to SHGs at three percent interest has gone up from Rs.7,100 crore last year to Rs.9,083 crore this year.