A meeting under the banner Forum for Group Discussion on Economic Issues (FGDEI) commenced on 21st July 2013 in Dawat Nagar, Okhla, New Delhi. This forum has been formed by Sahulat Microfinance Society in association with Radiance Viewsweekly in order to deliberate upon economic issues with regular periodicity. This was the sixth meeting of the series. The meeting started on a welcome note delivered by Mr Arshad Ajmal, Vice President, Sahulat Microfinance Society. In this meeting Ms Tahmina Laskar, Deputy Manager (Legal), Sahulat Microfinance Society, spoke on the topic "Legal Routes for Implementation of Interest-free Microfinance: Problems and Prospects."


During the presentation she explained how the Multi State Cooperative Societies Act (MSCS Act), 2002 provides better opportunity for registration, fund management, sharing of profit and loss, investment of fund, loaning and borrowing activities, risk management, compliance requirements and other related issues. If we go through the provisions of MSCS Act, 2002 the position is very clear.

The Act does neither restrict the operation of interest free cooperative credit society nor does it put hurdles in the formation of cooperative society. Moreover it is also an advantage point for interest free cooperatives in the country that the liberal Acts which are ten in number (Acts are for the State of Andhra Pradesh, Bihar, Chhattisgarh, Delhi, Jammu & Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Odisha & Uttaranchal) also do not contain any obligatory provision for payment of interest either on deposits mobilized from members or on loans given to borrowers. It creates a conducive legal environment for registering interest free cooperatives in those ten states where these liberal acts are applicable. Liberal Acts were enacted keeping in mind the fact that cooperatives should be member controlled and self-sustained primarily.

However, she also pointed out that how legislations are not followed in letter and spirit as the regulator's approach is mechanical and conventional. Moreover the understanding of the interest free framework is still at a nascent stage and regulators are not familiar with it, so convincing the regulator of the viability of the unit also becomes an issue. The need of the hour is to change the perspective of the regulator through the definition and advocate the fact that both the basis of cooperatives and the interest free cooperative is mutuality and the core idea and basis is nowhere diluted. She also pointed out that the apprehension that is cast on the operations of interest free microfinance through cooperatives by the Microfinance Institutions (Regulation & Development) Bill, 2012. Advocacy on the legislative front also becomes imperative so that the legislator also has the perspective of interest free microfinance as a tool to financial inclusion.

Moreover the advocacy should be on the lines that the Microfinance Institutions (Development and Regulation) Bill, 2012 (Bill No. 62 of 2012) is not passed in its present form and that cooperatives are being excluded from the definition of Microfinance Institutions in the Bill.

There was lively participation and queries from the audience present. The meeting was concluded with concluding remarks from Advocate Khurshid Najmi where he reiterated the importance of advocacy on legislative and executive levels so that the legislations can be used to the enhance the possibilities of interest free microfinance within the existing legislative and bureaucratic set-up. The session was concluded with blessings of Dr Ausaf Ahmad.