The scheme, named 'Muttathe Mulla', aims to benefit people who have apprehensions regarding the formal banking channels and fall prey to private financiers who charge exorbitant rates of interest.Thiruvananthapuram: The Kerala government is introducing a small loan scheme to protect people belonging to the low-income groups from loan sharks. Under the scheme, which will be implemented by the Kudumbashree units with the support of cooperative societies, loans amounting from Rs 1,000 to Rs 25,000 will be offered.
The scheme, named 'Muttathe Mulla', aims to benefit people who have apprehensions regarding the formal banking channels and fall prey to private financiers who charge exorbitant rates of interest.
Officials will meet needy in their houses and carry out the necessary paper work to sanction the loans. The repayment has to be made in weekly instalments. The interest rate will be affordable to the beneficiaries.
The state-wide inauguration of the scheme will be conducted by minister for Cooperation Kadakampally Surendran at Mannarkkad in Palakkad district on June 26. Loan sharks and micro-finance firms that charge exorbitant interests thrive in rural areas. Many of them charge interests from 24% to 200%. This has led to many suicides, said the minister.
The minister said that a majority of the primary agricultural credit societies (PACS) in the state were self-sufficient with the regard to availability of deposits. The credit-deposit activities of cooperative societies are very healthy in the state, added the minister.
About 1,600 PACS in the state have 300 branches. It is the district cooperative banks that fund the primary societies low on deposits.
How the scheme works
An applicant will get loans amounting from Rs 1,000 to Rs 25,000 under the ‘Muttathe Mulla’ scheme. The amount can also be used for making a one-time settlement to close loans availed from loan sharks.
Loanees will be charged an interest rate of only 12% (Rs 1 a month for Rs 100). Of this, 9% interest has to be paid to the PACS. The rest can be claimed by the respective Kudumbashree or other self-help groups.
The maximum period for repayment is one year (52 weeks). In other words, a person availing a loan of Rs 1,000 should repay Rs 1,120 in 52 equal instalments. The scheme also has a provision under which loans can also be repaid in 10 weeks.
Features of the new scheme
• Loans in the range of Rs 1,000 to Rs 25,000.
• Interest rate of 12%.
• One year is the maximum period for repayment.
• Loans can be availed even to close loans availed from loan sharks.
• To be implemented with the help of Kudumbashree units.
• Aims to protect people belonging to low-income groups from the exploitation by loan sharks and private micro-finance firms.
• Increase public support for the cooperative sector and widen its social and economic base.
• Ensure financial inclusion of more sections of the society and promote their economic literacy.
What is a soft loan?
A soft loan is a loan on comparatively moderate terms and conditions as compared to other loans available. Simple processing, prompt disbursal, lower interest rates, long repayment period, etc. make such loans popular.
Implementation
Muttathe Mulla scheme will be implemented by the PACS, which have a wide base and public participation in the state, along with the respective Kudumbashree units in the area. At places where the PACS show reluctance to implement the scheme or lack financial stability, the scheme will be carried out by other cooperative societies.
Palakkad district has been selected for implementing the pilot project. One to three Kudumbashree units will take up the task depending on the number of beneficiaries. The Kudumbashree units will be selected based on their track record and trustworthiness. The Kudumbashree members will visit the people needing loans in their area and hand over the amount. They will also be responsible for collecting the repayment amount every week.
Each Kudumbashree unit will be given loans up to Rs 10 lakh on cash-credit basis at 9% interest rates for raising the money to be paid as loans to the low-income people. Societies needing refinance will be given the necessary funds by district cooperative banks at 8% interest. However, the interest rates in this regard will be flexible.
The cash credit of Rs 10 lakh to Kudumbashree unit is in addition to the loans already paid to them by PACS. This amount should be used by the Kudumbashree unit only for disbursal under the Muttathe Mulla scheme. The amount withdrawn by the Kudumbashree unit from PACS should be equal to the amount paid to beneficiaries. The responsibility of maintaining individual accounts also rests with the Kudumbashree.
Repayment
It is the Kudumbashree unit that should ensure the repayment of the loans. It should reach a formal agreement with the PACs in this regard. In case a beneficiary defaults on loan repayment for more than three months, the Kudumbashree unit can transfer the loan account to the PACS and free itself of the liability. However, if such cases amount to more than 20% of the total loans sanctioned, the cash-credit limit of the respective Kudumbashree unit will not be renewed in the subsequent years.
Supervision
Several committees will monitor the implementation of the scheme. At the society level, the committee will be headed by the panchayat president as chairman and society secretary as convenor. The district panchayat president will be the chairman and cooperative society joint registrar (general) the convenor at the district level. Meanwhile, at the state level, the chairman will be the minister for cooperation and the convenor will be the cooperative societies registrar.
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