“For the first time in the last four years, I am able to save Rs 1,000 a month.” This is how Ms Manjula, member of a self-help group (SHG) in Jawahar Nagar, Warangal, Andhra Pradesh, sums up her experience of living without loans from microfinance institutions (MFIs) since October 2010.

According to Ms Shobha Rani, who hails from the same place, the reason for ‘comfort' is lack of fresh loans from MFIs.

“They were always after us to take loans which we could not refuse due to our poverty. The five-month gap gave us a breather,” she told Business Line .

When asked whether lack of fresh loans were causing any disruptions of economic activity, Ms Vijjammma from Tandur said there was no such problem.

Servicing old loans

According to the Reserve Bank of India's Malegam panel report, only 25 per cent of fresh loans was used for productive purposes by MFI clients, while the remaining went to servicing of old loans, among others.

“Banks are a little more proactive now, and many new members are joining thrift groups,” she said.

Interestingly, most of the clients of various companies are not willing to repay the old dues as well.

“The company field agents are now telling us that there were orders from the Supreme Court that we have to pay the loans with old interest rate. We know it is wrong and cannot repay anything now,” said Ms Annapurna, a group leader in Raghunathpalli village.

THE OTHER VIEW

The MFIs, however, claim that there are many who are in need of loans. A top MFI went to the extent of bringing about 150 group leaders from various parts of the State to a luxury hotel here to parade them before the electronic media recently.

Mr Reddy Subrahmnayam, Principal Secretary, Department of Rural Development, Government of Andhra Pradesh, said applicants without multiple loans were being permitted to access loans.

As on date, of the 73,376 fresh loan applications received by the State Government, 1,648 were approved while 67,064 were rejected. The remaining 4,664 are being examined.

The business operations of MFIs in AP, which account for 30 per cent the MFI market in the country, came to a halt after the State Government came out with a regulation in October 2010.

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