Home > microfinance india > To strangulate or to regulate? Microfinance at a cross roads in India

To strangulate or to regulate? Microfinance at a cross roads in India

The recent spate of suicides in the Andhra Pradesh state (45 in total over 2 months) largely attributed to individual borrowers inability to repay their loans has made a whole host of commentators say that the microfinance bubble has burst. My view is that it really ‘hasn’t burst; all that has happened is that industry is at a critical cross road in terms of regulation and introducing some kind of control over the activities of microfinance institutions. Ultimately these institutions are playing a part in terms of creating financial inclusion for hundreds of thousands of India’s poor so lets not throw away the baby with the bath water-lets focus on bringing in sensible regulation that regulates and does not strangulate the industry. For example regulations should cover interest rates and their transparency as well as the possibility of capping them, over indebtedness needs to be considered and MFIs need to be made to act responsibly in this respect. It’s definitely a time for dialogue between India’s Central Bank and the actors in the microfinance industry. Let’s not lets these poor people have dies in vain.

Categories: microfinance india
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