What should regulation do in the field of micro-finance?
Recent events in India have brought a fresh focus on the appropriate regulatory stance towards micro-finance. In this paper, we review facts and recent experience about Indian microfinance. We analyse the puzzles of financial regulation in this field from first principles, and argue that the mainstream mechanisms of consumer protection and micro-prudential regulation need to be modified owing to joint-liability groups. From this perspective, we suggest regulatory strategies that need to be adopted for dealing with micro-credit and financial distribution that focuses on the poor. This analysis and conceptual framework also helps analyse the two policy responses till date, the Malegam report and the draft Microfinance Bill, 2011.
|Date of creation:||Mar 2012|
|Date of revision:|
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- Xavier Gabaix & David Laibson, 2006.
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- Campbell, John Y. & Tufano, Peter & Madrian, Brigitte C. & Jackson, Howell Edmunds, 2011.
"Consumer Financial Protection,"
9887620, Harvard University Department of Economics.
- Shubho Roy & Renuka Sane & Susan Thomas, 2011. "An Economic policy and legal analysis of the Micro Finance Institutions (Development & Regulation) Bill, 2011," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-025, Indira Gandhi Institute of Development Research, Mumbai, India.
- M. Sahoo & Renuka Sane, 2011. "A Regulatory approach to financial product advice and distribution," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-029, Indira Gandhi Institute of Development Research, Mumbai, India.
- Bhole, Bharat & Ogden, Sean, 2010. "Group lending and individual lending with strategic default," Journal of Development Economics, Elsevier, vol. 91(2), pages 348-363, March.
- 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.
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