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The Evolution of India’s microfinance market – just a crack in the glass ceiling?

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  • Schmidt, Oliver

Abstract

A crisis of microfinance in Andhra Pradesh (AP) is of highest interest to microfinance practitioners and scholars and politicians around the world, because some of the world’s largest microfinance institutions (MFIs) are based out of AP. The current crisis has shaken microfinance in India and beyond and fuelled a heated debate on the (de)merits of commercialization, going public and credit-drive of MFIs. However, regulators and politicians are liable for creating an adverse institutional set up (or ‘choice architecture’) – in many places but in India even more. The article shows which poor choices of MFIs flowed from the adverse choice architecture. In particular it highlights the failure of India’s regulators to create formal space for micro-savings and the tendency of politicians to look at (rural) credit as a means of patronage. It concludes that the current crisis is an expression of changes in power relations within MFIs, among practitioners in the MF sector and between the MF sector and the polity/community it operates in.

Suggested Citation

  • Schmidt, Oliver, 2010. "The Evolution of India’s microfinance market – just a crack in the glass ceiling?," MPRA Paper 27142, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27142
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    Cited by:

    1. K. Branker & E. Shackles & J. M. Pearce, 2011. "Peer-to-peer financing mechanisms to accelerate renewable energy deployment," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 1(2), pages 138-155, April.
    2. Eberhard Weber, 2012. "Economic reform, social development and conflict in India," Regional Science Policy & Practice, Wiley Blackwell, vol. 4(3), pages 207-230, August.

    More about this item

    Keywords

    Microfinance; India; Andhra Pradesh; Regulation; Political Economy; Moneylender;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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