MICROCAPITAL BRIEF: Intellecap Publishes White Paper Analyzing Events Leading Up to Andhra Pradesh Microfinance Lending Crisis and State, Media Responses to the Crisis

Intellecap, a social-sector advisory firm with offices in India and the US, has released a white paper analyzing the events leading up to the ongoing microfinance lending crisis in Andhra Pradesh, a state on the southeastern coast of India. In light of accusations against microfinance institutions (MFIs) of transgressions such as usurious interest rates and coercive collection practices, the paper cites “harmful” effects of the media response and suggests that the “state government [may be] unhappy that its programs (and perhaps the individual influences of some members of government) are being undercut by the MFIs.”

The paper also analyzes the recent ordinance of the state government of Andhra Pradesh that aims to regulate lending with the express intention of protecting “the women Self Help Groups (SHGs) from exploitation by the MFIs.” It is the opinion of the authors that the ordinance may inadvertently lead to the shutdown of the microfinance industry. The authors offer several examples in support of this opinion. For instance, while MFIs must register with the State within a time limit, the State has no time limit by which it must complete the registration. Additionally, the Registering Authority may cancel an MFI registration at any time, which the authors believe could lead to abuse by said organization. Regarding the media, the authors point to the highly publicized suicides in Andhra Pradesh and the media’s willingness to correlate microfinance debt with said suicides without an in-depth investigation. Lastly, the authors believe that, separate from their opinions about the reactions of the State and media, the “microfinance industry must establish stronger ethical practices, reporting and compliance rules and encourage transparency.”

By Christopher Maggio, Research Associate

[1] Intellecap white paper entitled “Indian Microfinance Crisis of 2010: Turf War or a Battle of Intentions?”
http://intellecap.com/assets/82/Intellecap_Microfinance_White_Paper_Oct_2010_.pdf

[2] Andhra Pradesh Microfinance Ordinance 2010
http://indiamicrofinance.com/wp-content/uploads/2010/10/Andhra-MFI-Ordinance.pdf

MICROCAPITAL BRIEF: Microfinance Information Exchange (MIX) Assesses Potential Impact of Recent Microfinance Regulation in India’s Andhra Pradesh State
https://www.microcapital.org/microcapital-brief-microfinance-information-exchange-mix-assesses-potential-impact-of-recent-microfinance-regulation-in-india%E2%80%99s-andhra-pradesh-state/

MICROCAPITAL BRIEF: Series of Suicides Related to Microloan Repayment Rock India, Raises Questions of Whether Interest Rates Charged by Microfinance Institutions (MFIs) are Too High
https://www.microcapital.org/microcapital-brief-series-of-suicides-related-to-microloan-repayment-rock-india-raises-questions-of-whether-interest-rates-charged-by-microfinance-institutions-mfis-are-too-high/

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