with the standing committee rejecting the mfi bill, old questions come back to haunt MFIs

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and, after a long time, i write again on india’s search for regulatory mechanism for microfinance.

With the Standing Committee on Finance rejecting the latest avatar of the microfinance bill, old questions about the microfinance sector have resurfaced. Since 2010, when the controversial Andhra Pradesh ordinance made it all but impossible for Microfinance Institutions (MFIs) to operate in their largest market, the industry has been hoping that the passage of the bill would result in the removal of the ordinance.

But now, with the bill going back to the drawing board, says Mathew Titus, the executive director of industry association Sa-Dhan, banks will be nervous about the risk of further state-level interventions…

The other question is on how to regulate MFIs. After the 2010 AP Microfinance crisis, it seemed that a large part of the institutional response would take the form of this Bill — “The Micro Finance Institutions (Development and Regulation) Bill, 2012.” However, with the Standing Committee returning the Bill, that question is wide open again.

also, see these. on the need for the states to have a stay in mfi regulation. another story on the draft bill. on how to regulate mfis – story 1, story 2, story 3. and the need for regulation: story one, story two, story three, story four and story five.

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