In an email interview published on the website of Indian newspaper Mint, Mary Ellen Iskenderian, President and CEO of Women’s World Banking (WWB), a US-based advisor to and network of microfinance institutions (MFIs), offered an assessment of the Indian microfinance sector and the potential results of new and proposed regulation. Ms Iskenderian is concerned that “over-regulation or micro-management by regulators” may stifle the microfinance sector, leading to the decline of small MFIs that operate ethically and responsibly. Ms Iskenderian echos recent statements by Indian bankers and a report from Fitch Ratings, expressing hope that the regulation brought out by the Reserve Bank of India and the government of India will be “harmonized” and that state governments will not get involved in regulatory issues.
Commenting on the microfinance crisis that began in the Indian state of Andhra Pradesh in 2010, Ms Iskenderian blames unchecked growth and the “gradual drift away from deeply customer-focused finance.” Writing on the possible ongoing risks from the turmoil, Ms Iskenderian considers slower growth, investor hesitation, an increased cost of credit and a reduction in competition as potentially impacting MFIs and their low-income clients. Ms Iskenderian noted that the current proposals are inflexible to models other than the “outmoded joint-liability group model.”
In examples taken from Peru, Bolivia and South Africa, Ms Iskenderian cites benefits from credit bureaus, rigorous reporting standards and penalties for unethical institutional behaviour. Generally, Ms Iskenderian is optimistic that a stronger Indian microfinance sector can emerge through regulation that promotes innovation, spurs competition and monitors growth.
By Rohan Trivedi, Research Associate
About Women’s World Banking (WWB):
Women’s World Banking (WWB) is a nonprofit microfinance organization that was founded in 1976 and is based in New York, USA. WWB provides technical and advisory services to its global network of microfinance institutions (MFIs) in an effort to alleviate global poverty by expanding the economic assets, participation and power of poor people, especially women. As of February 26, 2010, WWB had 40 member institutions, working in 28 countries and serving over 20 million microentrepreneurs.
Sources and Additional Resources:
[1] Mint: “Mary Ellen | Over-regulation puts the microfinance industry at risk”, http://www.livemint.com/2011/04/28220808/Mary-Ellen–Overregulation-p.html
MicroCapital.org story, May 3, 2011: “MICROCAPITAL BRIEF: Fitch Ratings Stresses Importance of Single Regulator for Indian Microfinance Sector”, https://www.microcapital.org/microcapital-brief-fitch-ratings-stresses-importance-of-single-regulator-for-indian-microfinance-sector/
MicroCapital Universe Profile: Women’s World Banking (WWB), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Women%27s+World+Banking+%28WWB%29
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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