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Loan Sharks Looting Tribals

The State Human Rights Commission issues a notice as reports of harassment of tribals by microfinance institutions surface.
Hyderabad | 5th October 2010
The State Human Rights Commission, on Tuesday, issued notices to 4 District Collectors and Superintendents of Police, directing them to submit a comprehensive report on the exploitation and harassment of microfinance institutions in tribal areas.

According to sources, the Commission, taking Suo Motu notice against the exploitation of tribals and farmers and luring them into taking loans at hefty interest rates, directed district Collectors Superintendents of Warangal, Anantapur, Karimnagar and Rangareddy to submit a comprehensive report on the affairs of microfinance institutions (MFIs).

Taking serious note on farmers committing suicides after being unable to repay their loans, the Commission asked the officials to submit their report within 15 days.

According to sources, the MFIs are having a free run in the tribal areas and targeting illiterate women, throwing all rules and regulations to the winds.

The MFIs are carrying out their business and pushing tribals into debt trap in violation of the AP Scheduled Area Money Lenders Regulation 1960, claim NGOs working with tribals.

According to the regulation, no person or institution can carry on the business of money-lending in scheduled areas unless they obtain a license.

Expressing serious concern, Khammam Collector V Usharani had written a letter to the government in February 2010, explaining the murky financial transactions of these MFIs.

Usharani had mentioned that these MFIs had obtained certificates of registration from the Reserve Bank of India to carry on the business of microcredit advances, lending money for agriculture, industries and market linkage developments.

They were working in scheduled areas by lending money and completely defeating the concept of Indira Kranthi Patham (IKP).

"Their method of extending loans to the groups with small interests looks apparently simple, but is accumulating to compound interest as the term of repayment is on a weekly basis, and coercive methods applied to recover the loans from the tribals amount to harassment," the Collector had said.

"Innocent tribal families are taken easily into the lap of these agencies, and ultimately become bankrupt, unable to repay the loans. Due to coercive recovery methods, certain borrowers have committed suicide," she noted.

She said a huge amount of bank loans were pending, forcing the bankers to refuse loans to the IKP groups.

Usharani pointed out that loans were given to tribals in the scheduled areas against the security of movable and immovable property where the Land Transfer Regulation 1959 was in force. She accused the MFIs of working against the agency laws.

Courtesy: INN
filed in:  Loans, Tribal Welfare, Microfinance, Human Rights Commission
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