Key areas in microfinance Budget 2015-16 should focus on
E. Kumar Sharma
February 20, 2015
Associate editor E Kumar Sharma lists the key points Finance Minister Arun Jaitley should focus on when he reads out his Budget speech on February 28.
- Announce measures that provide a specific role for microfinance institutions (MFIs) in the financial inclusion agenda of the government. MFIs need not be just agents but could be direct players. This holds for both for-profit and not-for-profit MFIs.
- Broaden the definition of priority sector lending to include different loan products, taking it beyond livelihood-related loans. It can include loans for education, health, water and sanitation, and even solar energy products. This should only be for low-income households. While it may be argued that the Reserve Bank of India has a greater role in this, the Budget can still look at this area.
- Increase the fund allocation for Sidbi's India Microfinance Equity Fund beyond Rs 300 crore. It should have a corpus of at least Rs 1,000 crore so that it can extend more equity to MFIs. Plus, take measures to make its access easier for MFIs, with more equitable terms and conditions.
- Exempt service tax on the processing fee charged by MFIs as it is the poor borrower who has to ultimately bear the cost.
- Exempt service tax on micro insurance services offered by MFIs.
- Provide tax holiday to MFIs. This will encourage more investments in the sector and benefit end borrrowers through lower interest rates.
- Liberalise domestic/ foreign ownership norms for small and medium MFIs with total loan outstandings of less than Rs 100 crore.
- Make a statement on the Microfinance Bill and its re-introduction.