There is confusion about the difference between Money Lenders and Micro-Finance institutions.
K.Govindaraju, Director SEVAI in his presidential speech in the inaugural session of three days workshop on Micro Credit and Rural Development jointly organized by SEVAI, Trichy, Gramium,Karur and Viswa Yuva Kendra, New Delhi in Trichy on Wednesday mentioned “Although Microfinance in principle are helpful credit plus to poor women, at the same time the interest rates charged by microfinance institutes are high compared to that of traditional banks” K.Govindaraju further added “ Micro finance Institutes are different from money lenders as there is confusion about the difference between Money Lenders and Micro-Finance institutions. Money lenders should not collect exorbitant rate of interest and should strictly comply with Tamilnadu Government Act regarding money lending rates.
Real Micro Finance Institutes should be legal and transparent and books of accounts and the associated documents are to be open for any official inspection and also the beneficiaries. Micro-finance refers to supply of loans, savings and other financial services primarily to the financially weaker section of the society. Women traditionally had less access to financial alternatives of ordinary credit lines and incomes. Although Microfinance in principle are helpful to poor women, several borrowers complain that the interest rates charged by a unregistered illegal money lenders in disguise of microfinance institutes and these illegal money lenders should not be allowed to function as most of the money lenders are collecting unreasonable interest rates.
The objective for MFIs should be to improve the quality of life of the poor by providing access to financial and support services to be a viable financial institution developing sustainable communities and to mobilize resources in order to provide financial and support services to the poor, particularly women, for viable productive income generation enterprises enabling them to reduce their poverty and to create opportunities for self-employment for the underprivileged. Microfinance is increasingly being considered as one of the most effective tools of reducing poverty. Microfinance has a significant role in bridging the gap between the formal financial institutions and the rural poor. The Micro Finance Institutions (MFIs) accesses financial resources from the Banks and other mainstream Financial Institutions and provide financial and support services to the poor and these loans may help families to cope with other kinds of economic challenges, providing a way to manage their meager “cash flow.” They can also use the money from MFIs to do things like pay school fees and medical bills, and sometimes just to buy food.” The workshop was inaugurated by Dr.K.Meena, Former Vice Chancellor of Bharthidassan University in the esteemed presence of Dr.P.Selvaraj, Shivani Group of Educational Institutions, Padmanaban, Field Publicity officer and Suresh Kumar, AGM, NABARD.Earlier Gramium P.Narayanan welcomed the gathering and Rajat Thomas of Viswa Yuva Kendra, New Delhi proposed vote of thanks. Around 65 NGOs of Tamilnadu participate in the workshop proceedings.