Alternative loan source than MFIs to reach the poor in AP
By Vaibhav Aggarwal
Mar 22, 2011
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The poor borrowers in Andhra Pradesh may soon have a reason to cheer. What else can make them happier than to receive an alternate source of loans than MFIs where they can borrow at interest which is one third of what they pay to MFIs.

The state government is in talks with National Bank for Agriculture and Rural Development (Nabard) regarding provision of direct and short term cash loans to customers which comprise of self help groups (SHGs).

"The first round of discussion is already completed. The objective of the move is to provide an alternative line of credit to the poor at about 12 per cent interest to meet any urgent/unforeseen cash requirement," Mr R. Subrahmanayam, Principal Secretary, Department of Rural Development, Government of Andhra Pradesh said.

"Though MFIs say that they are giving loans only to productive loans, in practice this is not completely true," said he.

"Instead of intermediaries (like MFIs), the bank would lend to SHG federations which would in turn lend to their members very short-term to short-term loans. There will be no profit motive unlike MFIs," Mr Subrahmanyam said.


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