> Posted by Siddhartha Chowdri
The current issues of microfinance in Andhra Pradesh have exposed the flaws of the Indian banking system, the current practices of some commercial MFIs, weaknesses in the self-help group movement, the inability of rating agencies to sufficiently scrutinize MFIs, and the political implications of providing services to the “base of the pyramid” in India. However, none of this is either new or unique to Andhra Pradesh. Commercial microfinance has had many setbacks. For example:
What should bother us is that governments, politicians, banks, MFIs, investors, journalists, bloggers, and clients repeatedly ignore the lessons of previous overheated microfinance markets. Instead of changing behavior, this nexus of irresponsibility leads politicians to blame MFIs, banks to blame rating agencies, clients to blame crop failures, MFIs to blame the media, and bloggers to blame everybody.
A lesson is only as lesson if we actually learn something and change our behavior. In this context, here’s what I wrote in June 2009 about the dangers of over-indebtedness in India’s microfinance sector:
At a financial literacy event I attended the other day, I had a long conversation with some of the senior management of Grameen Financial Services (Grameen Koota) about the delinquency issues facing ALL MFIs in the Indian state of Karnataka. Read more >
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