Need to set up govt-owned micro finance institutions: Assocham

NEW DELHI: There is a need to set up government-owned micro finance institutions across the country to fulfill the credit requirements of rural people, industry body Assocham has said.

The chamber would soon submit a proposal to the Ministry of Finance and the Prime Minister office in this regard, Assocham said. l

More than subsidies the poor need access to credit which can be well facilitated through the government-owned micro finance institutions, it said.

These financial centres would offer funds to poor people at lower interest rates compared to the existing private micro finance facilities, it said.

Currently, the privately managed micro financing firms have not been able to tap the market for credit disbursement because of high rates charged by them, Assocham said.

It said that this has forced rural entrepreneurs to take resort to local lenders, who charge high rates between 36 per cent to 60 per cent.

According to the chamber's estimates, the total requirement of micro credit in different locations of rural India is assessed at Rs 50,000 crore.

The financial services extended to poor people of rural India through the suggested micro institutions can leverage rural entrepreneurs initiatives and ensure economic security.

Although, India has a vibrant and established banking system but it largely caters to needs of entrepreneurs confined in cities, metros and townships still remain vastly unbankable.

Therefore, it is recommended that credit requirements of hinterland entrepreneurs are adequately taken care of by the suggested micro financing institutes as a vast chunk of growth in the future is expected to come from rural areas, Assocham said.