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The role of government in India's micro-finance industry

Author

Listed:
  • Renuka Sane

    (Indira Gandhi Institute of Development Research)

  • Susan Thomas

    (Indira Gandhi Institute of Development Research)

Abstract

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, the UID and mobile-based payments. 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.

Suggested Citation

  • Renuka Sane & Susan Thomas, 2011. "The role of government in India's micro-finance industry," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-007, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2011-007
    as

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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2011-007.pdf
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    References listed on IDEAS

    as
    1. Luigi Zingales, 2009. "The Future of Securities Regulation," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 47(2), pages 391-425, May.
    2. Shubhashis Gangopadhyay & Maitreesh Ghatak & Robert Lensink, 2005. "Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, vol. 115(506), pages 1005-1015, October.
    3. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111, December.
    4. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    5. Robert Cull & Asli Demirgüç-Kunt & Jonathan Morduch, 2009. "Microfinance meets the market," Contemporary Studies in Economic and Financial Analysis, in: Moving Beyond Storytelling: Emerging Research in Microfinance, pages 1-30, Emerald Group Publishing Limited.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Interesting readings
      by Ajay Shah in Ajay Shah's blog on 2011-08-21 10:29:00
    2. Difficulties with PFRDA's Draft Aggregator Regulations, 2014
      by Ajay Shah in Ajay Shah's blog on 2014-07-02 09:43:00
    3. Interesting Readings for August 23, 2011
      by Ajay Shah in Citizen Economists on 2011-08-23 21:40:50

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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