Microfinance Regulation for Financial Inclusion: The Street Child Needs Nurturing

After a short introduction discussing poverty levels and microfinance (MF) outreach in India today, the paper follows with a brief overview of the formal financial sector. Next, the publication highlights past government efforts to promote MF and the results of these efforts. The paper then discusses recent regulatory responses to perceived MFI abuses, with a particular focus on the case of Andhra Pradesh. Next, the document analyzes the likely effect on access to finance of the Reserve Bank of India's recent decision to permit banks to use banking correspondents to provide certain banking services. The paper concludes with a look at recent ongoing efforts to develop a regulatory framework for MF, and provides recommendations for regulatory reforms that could increase access to finance in the future.