Sub: Malegam Committee Recommendations Have One Fatal Flaw
& Raise Many Difficult Questions
– An Immediate Corrective Action Is Needed
THIS IS AN OPEN LETTER TO ALL CONCERNED WITH THIS MATTER
From: Dr. Ramesh Bellamkonda
Managing Director
BSS Microfinance Private Limited, Bangalore.
(The Opinions Expressed Here Are Solely Those Of The Author)
One Fatal Flaw In Malegam Committee Recommendations:
1.

Summary Recommendation 10, (11.12 (c)), that says “Field staff should not be allowed to make recovery at the place of residence or work of the borrower and all recoveries should only be made at the Group level at a central place to be designated” is a recommendation that is absolutely fatal to microfinance. If adopted, this will be a “Death Sentence”, nothing short. If this recommendation is adopted by the regulator, a ll that a borrower has to do to not repay, is to stop coming to the central designated place of collection of repayment. If the MFI staff go to borrowers‟ homes or work places in such a circumstance, the MFI staff would have violated the applicable regulations and the borrowers or others around them can call the police and have such MFI staff arrested. In a relatively short time, people will figure out how to not repay MFI loans. Some borrowers or their families or their neighbours or third parties will surely want to exercise this o ption.
Once exercised by some people here and there, this would have an extremely contagious effect on just about every one else and every where else. Soon, all collections will collapse. What is in Andhra
State now, will be all over India.
Loan repayment takes conscious effort and discipline on the part of the borrower. It often feels a little painful to most people. It does not happen automatically. If the above recommendation is adopted, the loans are guaranteed to go bad, in a relatively short time.