The Proposed Statutory Mechanism for Regulation of Micro Finance Organisations (MFOs) Accepting Thrift. A presentation by Cooperative Development Foundation, Hyderabad on 18 th January 2007 at the Annual Policy Conference of Sa-Dhan held in New Delhi on 17-18 January 2007.
A presentation by
Cooperative Development Foundation, Hyderabad
on 18th January 2007
at the Annual Policy Conference of Sa-Dhan
held in New Delhi on 17-18 January 2007
Mohandas Karamchand Gandhi:“The poorest of the poor should have control over their own lives and destinies.”
Pawan Kumar Bansal, Minister of State for Finance, Government of India: “That government is the best government that governs the least.”
Ela Bhatt, Chair Emeritus, Sa-Dhan:“The micro finance activity must be provided with a level playing ground and a friendly government policy.”
Amitabh Verma, Joint Secretary, Department of Finance, Government of India:“The Union Government will validate the acceptance of thrift by MFOs.”
The following legal entities that choose to accept “thrift” for providing micro finance services will be known as Micro Finance Organisations (MFOs):
Thrift means any monies (not exceeding such amounts as may be specified by NABARD from time to time) accepted by an MFO for providing micro finance services.
In the context of the proposed Regulatory Mechanism, the entities mentioned in the previous slide can accept Thrift only after being registered with NABARD.
NABARD can issue directions to MFOs in the following instances:
The MFO or MFOs concerned shall be bound to comply with such directions.
No court shall take congnisance of any offence punishable under this Act, Rules and Regulations, save on a compliant made by the NABARD with the prior sanction of the Union Government.
The Bill chose to call non-banking finance company (NBFC) as micro finance institution (MFI) and excluded it from the proposed regulatory mechanism.
Self Help Groups (SHGs), whether accepting Thrift or not, are excluded from the proposed regulatory mechanism.
In addition to the regressive and undesirable provisions in the Bill, the Union Government is vested with the power of making rules for carrying out the provisions of the Bill.
The Union Parliament is being requested to enact a law that completely nullifies the principles of mutuality and cooperation.
The Union Government is being vested with the power to make rules.
A regulatory authority is expected to make regulations and the NABARD is being vested with that power.
GoI, RBI, and NABARD have been exercising, for decades, the regulatory and supervisory powers in respect of:
State Cooperative Banks (SCBs)
District Cooperative Banks (DCBs);
Urban Cooperative Banks;
Regional Rural Banks.
All these financial institutions, from there inception, are supposed to be micro finance institutions. Their present health does not speak well of GoI, RBI, NABARD.
If the proposed Bill gets converted into an Act, one need not be an extra-ordinary skilled analyst (or a well reputed astrologer) to predict the fate of the Micro Finance Organisations that are supposed to be regulated by the NABARD, under the benign guidance and/or direction of the RBI and the GoI.
Should the Stake-holders and the Concerned Citizens, mutely, allow the conversion of the MFOs Bill into an Act of Parliament?
Answer is clear: No. They should not, at least in the form that it exists now. They should read the fine print; they should read between the lines. Then act.