As Microfinance Explodes in India, Regulators Step Up Oversight

The Indian Microfinance Platform is launching this month, increasing transparency and standardizing reporting for the public domain.

Indian letter writer

Microfinance is getting big in India—so big, in fact, it's having its first growing pains.

Concerns have been raised about fair lending processes, standardized rates, and a lack of transparency in microfinance institutions (MFIs). So the India Microfinance Platform (IMFP) will be established this month, due to "over-heating, employee poaching, multiple lending, and lack of common reporting" in the sector, according to Microfinance Focus. Standard Chartered Bank, the Reserve Bank of India, and the Indian Bankers Association are all signatories to the new platform, which will standardize microfinance reporting and allow a joint loan portfolio audit of Indian microfinance heavyweights such as SKS Microfinance, Bandhan, and Equitas.

The Small Industries Development Bank of India (SIDBI) is expected to be a primary actor in the IMFP and wants to make a common reporting system available to the public domain.

ACCION was recently named the world's most effective microfinance non-profit, and what makes them so competitive is their perpetual cycle of innovation, among other attributes. While already present in India, they've recently entered one of the poorest states, Bihar, which may help other MFIs learn from their approach, especially with the introduction of the IMFP. Competition can certainly spur innovation, so let's see what happens.

[Image via Flickr/Rita Banerji]

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