Special Debate: Microfinance Credit Bubbles and Self-Regulation
Is there a microfinance bubble in India? Can self-regulation help prevent it? Directors of leading Indian MFIs, Vijay Mahajan of BASIX and P.N. Vasudevan of Equitas share their views on whether such a bubble exists, as well as what Indian MFIs are doing to prevent one from happening. Daniel Rozas and Sanjay Sinha provide an update on the level of saturation in the Indian microfinance market, and discuss their thoughts on whether self-regulation by Indian MFIs can be effective at controlling overlending.
Microfinance in India: Twin Steps towards Self-Regulation
By Vijay Mahajan and P.N. Vasudevan
The past few years have seen the entire microfinance sector grow exponentially. As with any other boom, suspicion always exists on whether a bust is just around the corner. This is especially true in the current international setting; with a major financial bust that humbled Alan Greenspan to admit he was “in a state of shocked disbelief”. In hindsight, it might seem obvious that the years of heady growth directly resulted in the sub-prime crisis and credit crunch. This heightens the sense of unease over the rapid growth of the microfinance industry and one is often seized of whether we are sitting on a bubble waiting to burst… Read more
Avoiding the Bubble: Is Self-Regulation the Answer?
By Daniel Rozas and Sanjay Sinha
We live in a time of object lessons. The economic crisis continues to buffet many countries, including the US, where the unemployment rate has now breached 10% for only the second time in the last 70 years, taking only 18 months to get there – the largest and steepest increase since World War II. Three years after the first rumblings in the US subprime mortgage market, many banks around the world are still ailing. The microfinance industry has not been immune either – MFIs in countries as diverse as Nicaragua, Bosnia, and Morocco are under severe stress, while many others have seen their portfolio numbers deteriorate significantly…. Read more
