Monday, March 21, 2011

[ZESTCaste] tirbunal on micro finance in vellore


forthcoming pen shakti- tamil magazine

What should women demand from people who stand for TN assembly elections with regard to micro finance?


Is it just that middle/upper class people get loans at 11% interest rate from banks, while the poor get at 26-40% or above from Non Banking Financing Companies (if one goes by the reports of the poor who took into account the money collected initially for membership and insurance)? That too the burden of interest is borne by poor women from unorganized sector and from dalit, adivasi, Muslim communities. In fact, I repeatedly get phone calls asking me whether I want a loan at 13% interest rate, while these poor women- some of who have not had opportunities to get literacy and numeracy skills- get home visits offering huge loans for any purpose ranging from food crisis, dowry expenses, health expenses, education expenses, their husbands' production needs, their production needs, their friends needs and so on at interest rates which are not transparent to them.  All they have to do is form  a joint liability group of 5 to 15 people depending on the NBFC concerned.  I thought the government was supposed to meet food needs of the poor through PDS system, health and education needs of the poor through universal health and education, ensure 100 days of employment in rural areas, implement self employment schemes like SGSY and is also supposed to form SHGs and federate them under the Mahalir Thittam scheme.  

A deeper analysis of the injustice revealed that the government on the one hand needs to better implement the various schemes (which is not specific to Tamil Nadu, public health systems here are in fact better in Tamil Nadu than India as whole), but more shocking were two other factors: priority sector lending was going into three of the six NBFCs studied and three of the NBFCs had issued venture capital or Initial public offers or non convertible debentures. That is poor women had become a ground for investment! As a result of diversion of priority sector lending the SGSY scheme was poorly implemented in Tamil Nadu, like the rest of India.  The huge scam is a failure and lack of accountability of not only the state, but also the  banks, corporate houses and individuals from India and abroad who have invested in the NBFCs. It may be worth examining if investments from the west have increased in the light of financial crisis there. As some of the NBFCs began as a NGO, it is also a failure of these NGOs (cannot be generalised to all NGOs).   At a broader level, there is a crisis in humanism as how can the NBFC staff have the heart to exploit poor women? One staff collected repayment money and disappeared!

The scam is not particular to Tamil Nadu, but is happening in other states as well. Other than Andhra Pradesh where the government has passed an ordinance regulating the micro finance sector recently, none of the others are yet to take action and the national bill is still pending.

What are the consequences to poor women who could not repay? Several of the women from five districts in the public hearing organized by the All India Democratic Women's Association Tamil Nadu Women's Forum, and Tamil Nadu Dalit women's Movement and on 26th February, 2011 in Vellore district reported not being able to go to work on MNREGS work sites as the profit laundering NBFCs arrived early in the morning and would not leave. Several reported selling off their thalis (to them important), mortgaging ration cards/gas cylinders, selling utensils and gold to repay.  Several reported usage of obscene words "like sell your body and repay" or "ask your daughter to sell her body and repay".  Several reported increase in violence against them by their husbands as the pressure to repay built up, and inability to sleep in peace.   Some reported being retained in their own house the whole day till they gathered the repayment amount, and one woman out of thirty reported that her dress was ripped apart.  A case of a woman who did not come for the hearing but reported being taken to the NBFC office and released after husband complained to police was also shared.  Three out of thirty reported pulling their children out of school and putting them to work to repay. Two reported being non poor when taking the loan, and becoming poor after taking one. Some reported being asked to commit suicide so that the life insurance amount could cover the pending loan (provided relatives said it was natural death). A case of a woman being asked to repay loan she took for her friend's family after they absconded was also reported. The NBFCs pitted the group members against each other, as it was joint liability. The ray of hope was a Mahalir thittam group telling the NBFCs not to enter their village as they had seen through the scam.

While earlier under the government formed Mahalir Thittam there were occasions (depending on which NGO had formed the group)  when poor women would unite to close arrack shops, handle cases of violence, preventing early marriage etc the NBFCs had divided the poor women through joint liability. In particular group leaders were given gold coins by the NBFCs if the ensured 100% repayment. While joint liability is also a feature of the Mahalir thittam, they have the buffer of collective savings and groups and banks accept  delays in repayment during festival season or during personal calamities. While one is not glorifying Mahalir Thittam (poorest do not join if they cannot save, women in the scheme are harnessed as vote banks by dominant political parties, group leaders get more loans, deep rooted class, caste and gender hierarchies persisted), it certainly offered loans at lower interest rate to women and NGO staff and TNWDC staff under the scheme did not harass poor women like this.                         

What then should we ask the people who come to us seeking votes? If you have suggestions write to penn shakti. There is likely to be a state level public hearing and we could take your advise into account- it would probably be wiser than mine.

Immediate demands to people who stand for elections and from state government could include (taking leads from the jury[1] and organizers, but all may not agree with these recommendations- and all recommendations from jury not included)

·        Pass an ordinance that allows only those MFIs (NBFCs, cooperatives, societies, trusts, producer companies etc) which are willing to charge less than the rate for rich to function. A cap of 4% like the much earlier Differential rate of Interest scheme is appropriate. Automatically the NBFCs and other profit laundering MFIs will leave      

·        In the interim, bring NBFCs and other MFIs under the usurious lending act and disseminate information that harassment by NBFCs and other MFIs charging higher than the rates stipulated under the usurious lending act can be booked under this act.  

·        In the interim, disseminate information that those MFIs directly/indirectly (though other group leaders/members) harassing women using obscene words/acts can be booked under IPC 341 (Punishment for Wrongful Restraint), and sections related to words, gestures or actions intended to insult the modesty of a woman. 

·        Collectors and state commission for women to set up a help line for poor women

·        All cases of suicides and recorded natural deaths of women in MFIs to be checked whether it is due to harassment by profit laundering MFIs

·        Government to provide free legal support for poor women who are harassed

·        Regulate insurance so that it is not used to cover the loan, but the women/spouse concerned.

·        Collector to call for monthly meeting of all MFIs to regulate them

·        Collector to call for meetings of all nationalized banks to ensure that first priority is to fulfill commitment under SGSY and Mahalir Thittam

·        Government should not consider lending by banks to NbFCs, producer companies, NGOs delinked from government programs as priority sector lending  

Medium  term demands could include:

·        Government should cover 100% poor through Mahalir Thittam/SGSY scheme (form no savings group so that the poorest can also join) or restart the individual Differential Rate of Interest (4%) scheme for poorest and ensure that between all these schemes credit needs of the poor are started

·        Peg interest rate to poor at 4% which is below the rates for the rich. 

·        Ensure that the budget allocated to government schemes meets 100% of the credit needs are met through government schemes.  

·        Implement MNREGS to fullest extent with stipulated wages. 

·        Extend SGSY and Employment Guarantee scheme to urban areas 

·        Government should impart financial literacy to poor women, and basic numerical and reading literacy to women who cannot read and write

·        Go beyond gender training to groups and federations to issues include issues of justice based on caste, class, religion, gender etc. Legal and human rights literacy a must     

Long term demands could include:

·          Land reform and land given in joint names of poor women from landless households, dalits, adivasis, Muslims etc.

·          Stop privatization of agriculture, forests, in land water resources, sand,  coasts etc

·          Invest in agriculture growth with a focus on strengthening food and nutritional security

·          Adopt labour intensive growth models

·          Give common property resources to dalit/tribal/Mulsim women/women from landless households  like quarries, ponds, lakes, trees, market etc

·          Give labour contracts, garbage disposal contracts etc to women's groups from marginalized communities

·          Strengthen public health, education, PDS, anganwadi system so that poor do not have to go to private sector for these

·          Strict implementation of dowry prohibition act, and curb expenses on marriages, ear piercing ceremonies etc

·          Put a ceiling on how much assets rich people can own- the rest they have to give back to society

·        Do not use MT federations as vote banks but train them through partner NGos to challenge neo liberal models of growth, casteism, class hierarchies, exclusion of minorities, and tribals.  

·        Reform TN cooperative Act and make it mutually aided cooperative Act or have a parallel act along those line


[1] The jury included Saraswati, Periyarsirimai,  Nirmala, AIDWA,  Issac Kadirvel, Ambedkar Mandram and self as an Independent Researcher.  

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