Bhubaneswar: High-cost loans from microfinance bodies have more often landed women self-help groups into a debt trap, Kerala's former finance minister Thomas Isaac has said.
He said MFIs charge high interests on loans given to women self-help groups.
"MFIs used to take 24 per cent of interest from women self-help groups other than processing fees. As a result of which, they are often unable to repay loans and go for more advances to make repayments. In this process, they get entangled into a debt trap and are not able to overcome it," Isaac said.
He was addressing the 4th Sushila Gopala Memorial Lecturer on Women in the Web of Modern Moneylenders, organised by the Odisha unit of All India Democratic Association (AIDWA) here on Sunday.
He also alleged that there was "no regulation" on the MFIs.
Echoing Isaac, Tata Institute of Social Science Prof R Ramakumar claimed that the "microfinance mechanism is meant for earning super profit by financing the poor".
AIDWA national secretary Tapasi Praharaj also alleged that women self-help groups "are being hugely exploited by MFIs" as banks "hesitate" to give loans directly to them.
“The rate of interest should not be above 11.25 per cent as stipulated by the Reserve Bank of India, and all the states should have a mechanism to stop the modern-day moneylenders who have appeared in the name of MFIs," she said.
The speakers at the event said the economic conditions of women have become "worse" due to lack of jobs in view of the prevailing COVID-19 pandemic.
"Whatever provisions are made by the governments, they mostly benefit the MFIs and not the women," Praharaj said.
They demanded strong regulation on activities of the institutional moneylenders. (PTI)