A Policy Response to the Indian Micro-Finance Crisis

49 Pages Posted: 17 May 2011

See all articles by Renuka Sane

Renuka Sane

Trustbridge Rule of Law Foundation; National Institute of Public Finance and Policy

Susan Thomas

xKDR Forum; Jindal Global University

Date Written: March 31, 2011


Recent events in India have brought a fresh focus upon the problem of regulation in the field of micro-finance. This paper delineates the three distinct aspects where government needs to play a role. The first is to protect the rights of the micro-borrower, the consumer of micro-financial services. The second is that of prudential oversight of risk-taking by firms operating in micro-finance, since this could have systemic implications. The third is a developmental role, emphasising scale-up of the micro-finance industry where the key issues are diversification of access to funds, innovations in distribution and product structure, and the use of new technologies such as credit bureaus and the UID. Each of these roles need to be placed in an existing or a new regulatory agency. There is a case for creating a new regulatory agency which unifies the consumer protection function across all financial products.

Keywords: financial services distribution, consumer protection, credit bureaus, securitisation, micro-finance

JEL Classification: G20, G21, G28

Suggested Citation

Sane, Renuka and Thomas, Susan, A Policy Response to the Indian Micro-Finance Crisis (March 31, 2011). Available at SSRN: https://ssrn.com/abstract=1842926 or http://dx.doi.org/10.2139/ssrn.1842926

Renuka Sane (Contact Author)

Trustbridge Rule of Law Foundation ( email )

New Delhi

National Institute of Public Finance and Policy ( email )

18/2, Satsang Vihar Marg
New Delhi, 110067

Susan Thomas

xKDR Forum ( email )

38, Patrakar CHS, Gandhi Nagar road no 5
Bandra East
Mumbai, IN India 400 051
00919821230385 (Phone)

Jindal Global University ( email )

Sonepath, Haryana, 131001

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