MICROCAPITAL BRIEF: Indian Microfinance Institutions (MFIs) Consider Legal Action Against New Regulations in Andhra Pradesh

Indian microfinance institutions (MFIs) are considering using legal action to attempt to block regulations of MFIs proposed by the government of Andhra Pradesh.

The new regulations, proposed after a string of suicides in India linked to abusive MFI practices [4], would require MFIs that are non-banking finance companies (NBFCs) to register with local authorities to disclose the interest rates they charge and their areas of operations. “It appears that the ordinance has been drafted in a hurry without taking into consideration all aspects,” says an unnamed staff person of Microfinance Institutions Network (MFIN), a group of MFIs that is reportedly contemplating legal action to stall the proposed legislation. Other MFIs, such as SKS Microfinance, a publicly-traded MFI, also expressed concerns about the potential impacts that the regulation would have on their operations [3]. The Reserve Bank of India (RBI), central bank of India, has reportedly dispatched a team to Andhra Pradesh to assist the government as it prepares the new regulations [2].

The Indian MFIs reporting data for 2009 to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, have an aggregate loan portfolio of USD 4.6 billion, total assets of USD 5.1 billion and 26.4 million active borrowers.

About the Microfinance Institutions Network (MFIN):

The Microfinance Institutions Network (MFIN) is a trade association of Indian microfinance lenders. MFIN is presided by Vijay Mahajan, who is also the Chairman of Hyderabad-based BASIX. MFIN consists of 39 NBFC-MFIs in India, which account for more than 80% of the Indian market. MFIN is supported by Omidyar Network, a philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group. Omidyar Network funds MFIN in support of its efforts.

By Trevor Kwong, Research Assistant:

Sources and Additional Resources:
[1] Source Article: MFIs to move HC against AP ordinance:
http://timesofindia.indiatimes.com/business/india-business/MFIs-to-move-HC-against-AP-ordinance/articleshow/6772359.cms

[2] Daily News Analysis: RBI team to visit Andhra Pradesh over microfinance issues:
http://www.dnaindia.com/money/report_rbi-team-to-visit-andhra-pradesh-over-microfinance-issues_1454628

[3] Top News: SKS needs legal clarification on AP govt’s restrictions:
http://topnews.ae/content/24492-sks-needs-legal-clarification-ap-govts-restrictions

[4] MICROCAPITAL BRIEF: Andhra Pradesh Government Plans Legislation to Restrict Collection Practices of Microfinance Institutions (MFIs) After Rise in Suicides Among Borrowers:
https://www.microcapital.org/microcapital-brief-andhra-pradesh-government-plans-legislation-to-restrict-collection-practices-of-microfinance-institutions-mfis-after-rise-in-suicides-among-borrowers/?utm_source=rss&utm_medium=rss&utm_campaign=microcapital-brief-andhra-pradesh-government-plans-legislation-to-restrict-collection-practices-of-microfinance-institutions-mfis-after-rise-in-suicides-among-borrowers

[5] Microfinance Information Exchange: India:
http://www.mixmarket.org/mfi/country/India

[6] MicroCapital Universe: Microfinance Institutions Network (MFIN):

https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+(MFIN)

[7] MICROCAPITAL BRIEF: Mr Vijay Mahajan, President of Microfinance Institutions Network (MFIN) and Chairman of CGAP (Consultative Group to Assist the Poor), Argues Banks Should Charge Microfinance Institutions Less than 10%:

https://www.microcapital.org/microcapital-brief-mr-vijay-mahajan-president-of-microfinance-institutions-network-mfin-and-chairman-of-cgap-consultative-group-to-assist-the-poor-argues-banks-should-charge-microfinance-instit/

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