OPINION: Can microfinance be self-regulated?

Friday, February 14, 2014

The Reserve Bank’s recent announcement, recognising industry associations as self regulatory organisations (SRO) is being seen as a positive development for the microfinance industry (MFIs).

But have MFI associations acquitted themselves well enough to deserve this regulatory mantle?

The industry has nearly 30 million clients and a loan portfolio of over Rs. 240 billion. The RBI has now sought applications from industry associations, which comply with specific norms to be recognised as SRO.

The associations must have the financial wherewithal (without being overly dependent on subscriptions from its members) and a third of its board members as independent directors. The SRO is expected to induct all MF practitioners irrespective of size.

Source: The Hindu Business Line (link opens in a new window)

financial inclusion, governance, microfinance