Indian Microfinance Crisis of 2010: Finding the Silver Lining

This Update to Intellecap’s White Paper offers a view on the changing perceptions of industry stakeholders from the time that the Government of the state of Andhra Pradesh in India promulgated an Ordinance attempting to regulate the microfinance industry in the state On 15 October 2010.

Intellecap’s White Paper provided an overview of events leading up to the promulgation of the Ordinance, assessed the implications of its provisions and evaluated its impact on the industry. The paper states that:

• Initial industry reactions to the Ordinance were uniformly negative;
• Recent events have changed stakeholder perceptions of the Ordinance;
• Anecdotal evidence from the field appears to be moderating extreme positions in government and industry;
• Government appears to have toned down some of its rhetoric;
• Microfinance industry has begun to acknowledge that the Ordinance provides the basis for some cleaning-up;
• Current crisis could become a turning point, leading to a more balanced, better governed and better understood microfinance industry.

The paper concludes that the ongoing crisis has demonstrated that there are misconceptions about microfinance. It has demonstrated a need for the industry to be more open and for the media to educate society.