Minorities finance body advised to relax norms for aid to SHGs

New Delhi, Apr 17 (UNI) An expert panel on restructuring of the National Minorities Finance Development Corporation(NMFDC) wants it to scrap the requirement for Self Help Groups(SHGs) to have 60 per cent members from the minority community to be eligible for assistance.

The condition has come in the way of the success of micro finance schemes started by the NMFDC because of the absence of adequate number of minority micro-finance and self-help groups.

''This requirement can be relaxed and cases may considered individually. This is more important because the main objective of NMFDC is to uplift the minorities to bring them into the mainstream,'' the Committee said in its report submitted last week.

The NMDFC was constituted in 1994 as a Public Sector Enterprise under Section 25 of the Companies Act.

The panel in its report said it was evident from past experience that poverty alleviation schemes were only successful and sustainable if they were carried out using organisations which were very closely linked to the minority community.

This is because the key task in such schemes is the identification of genuine candidate and monitoring them after disbursement. This can be done at the community level.

The panel also wanted change in the lending rates. At present NMFDC provides credit to state channelising agencies (SCAs) at three per cent and expects them to lend at six per cent. But to encourage micro-finance institutions to reach out to the minority communities and form self-help groups among them, the Corporation provides funds to these institutions at 6 to 8 per cent and allow NGOs to lend at an interest at which they are able to cover their operating expenses. The interest rate ceiling of five per cent must be done away with.

The experts have also suggested that banks distributing loans under NMFDC schemes should be given more freedom in setting interest rates and selection of beneficiaries.

The schemes for minorities have usually PSU banks as their primary distribution channel. Although the fund distributed in these schemes is very large as compared to NMDFC, it is not necessarily more successful as repayment rates have been between 30 per cent to 60 per cent for most of such schemes.

The experts also call for strengthening of the SCAs.

It has suggested that lending and borrowing rates for the SCAs should be at the prevalent market rates so that these agencies could recover their operating costs.

The Committee has recommeded structural changes in the coprorations envisaging a public-private partnership model to enable it to play a more effective role.

It wants the NMDC to shed its not-for-profit status and act as a government owned holding company. It will also generate its own revenue surpluses to finance welfare schemes.

The main focus of the partnership with private efforts should be in the field of education, jobs and social infrastructure.

The committee, headed by Mr Nasser Munjee, chairman, Development Credit Bank, was appointed to suggest NMDFC restructuring as the government wanted it to expand its scale of operations considering the size of the envisaged target group.

UNI