Special series on recent events in Andhra Pradesh, India and what it means for the future direction of microfinance.

In late summer/autumn of 2010 the perfect storm hit microlending in the Indian state of Andhra Pradesh. In July SKS, the largest and fastest-growing microfinance institution in India with about 6 million clients, issued an IPO. The company valuation reached the top of the offer band price at US$1.5 billion, and five weeks after trading [...]

“Acting responsibly is almost against human nature – we always seem to need external restraints.” At the recent Responsible Finance Forum, Alok Prasad (CEO of MFIN, the association of Indian commercial MFIs) offered a hard-hitting assessment of what went wrong in Andhra Pradesh, focusing on how investors contributed to the situation and what they can [...]

SHGs (Self-help groups) need to return to their original fundamentals of being strong grassroots institutions and the market for credit needs to be segmented The focus of concern in the recent past, and leading up to the Andhra Pradesh microfinance crisis, has been the risk to commercialized microfinance organizations or MFI-NBFCs. Very little has appeared [...]

This is an opportunity to bring “people practices” at the forefront of the microfinance sector Three weeks ago, just at the height of the microfinance unrest in India’s Andhra Pradesh state, panelists at the Microfinance India Summit 2010 said that an increased focus on financial literacy, creation of more credit bureaus, and greater pricing and [...]

The Andhra Pradesh (AP) government passed an ordinance introducing substantial changes to MFI lending practices in the state. This ordinance aims to “protect the women self help groups” and the interests of the poor by attempting to reduce multiple borrowing, avoiding harsh collection practices, and altering repayment procedures, among other measures. However, the key questions [...]

The Andhra Pradesh MFI Ordinance 2010 has kick-started a much-needed debate on responsible microfinance and what is needed for poverty alleviation in India. Going back as far as 2003, there have been concerns about certain practices of MFIs in Andhra Pradesh: splitting Self Help Groups (SHGs) to form Joint Liability Groups (JLGs), charging unreasonable interest [...]

Referring to the situation in Andhra Pradesh (AP) as a ‘crisis’ in recent coverage has become commonplace.  Much of the debate and analysis is centered on microcredit. A number of analysts have compared SHGs and MFIs as competitive approaches, offering microfinance services to the poor.  I feel that we are comparing apples to oranges and [...]

The microfinance sector had been given enough warning signals Governments legislate on conduct of business—from both positive/ enabling and negative/restrictive standpoints. While most regulations on business, commerce and industry are positive, some are highly restrictive on account of the nature of business. For example, manufacturing and using radioactive material or dealing with habit-forming psychotropic substances [...]

Fresh Data from IFMR’s Study Reveals a Complex Situation The crackdown by the Andhra Pradesh state government on microfinance institutions was based on a number of assumptions about what’s happening with microfinance here in India. [In case you haven’t been following what’s happened over the last month, check out a good overview of what’s happened [...]