Big Trouble for Microfinance

Tuesday, December 7, 2010

OVER the past month, we’ve covered the ongoing crisis in the microfinance industry in Andhra Pradesh, the state in India where microfinance-especially, but not only its for-profit variant exemplified by recent stock-market debutant SKS-has grown most rapidly and has the largest number of borrowerss.

The situation on the ground seems to have remained largely unchanged since we covered the story here: collections in Andhra Pradesh are still on hold, the MFIs remain on the defensive (it seems that SKS’s “voluntary” interest rate cap approach is now being more widely adopted), and the scope and nature of regulation in the Indian market remains vague. This is so far an Indian story (though there are also unrelated worries in Bangladesh) but it raises a lot of questions about what we can or should expect from microfinance and what the right way to regulate what is now a pretty big market, with a whole lot of poor borrowers, is.

Source: The Economist (link opens in a new window)