Microfinance is an effective tool for financial inclusion. Here are some elements of the recently embattled sector The recent controversy surrounding the microfinance sector has entirely eclipsed the fact that it is the first effort in India to have delivered financial services to remote corners of the country in a self-sustaining manner. The stakes are high for India’s poor, and we have to pave the way for orderly growth in the...

India's banking industry has thrown its support behind microfinance lenders after weeks of upheaval and confusion. Major banks like the State Bank of India, Standard Chartered and Citi have all agreed to continue lending to microfinance firms. The multi-billion dollar industry was on the brink of a mass default. The banks' support has hung in the balance since lenders became embroiled in controversy in the southern state of Andhra Pradesh. About four weeks ago,...

The microcredit revolution has been celebrated for helping poor women in developing countries start small businesses. By borrowing money for purchases such as a buffalo or sewing machine, the women were able to help lift their families out of poverty. But critics say the microcredit model has been perverted by commercial greed in India, with reports of abusive collection methods and sky-high interest rates. "What began as a simple, innovative model...

The Andhra Pradesh Police on Friday said it has arrested three people working with SKS Microfinance and Spandana on a complaint of harassment by a borrower, and might book the companies' respective promoters Vikram Akula and Padmaja Reddy under a new Ordinance to check coercive methods of loan recovery. The borrower, Ammulu, filed the complaint with the Yemmiganur police station in Kurnool district, about 270 km from Hyderabad, last night. A...

Public uproar over 20 suicides in two months has forced the Andhra Pradesh government to act to regulate micro-finance institutions. On October 14, the state government brought an ordinance making it compulsory for MFIs to register themselves, declare the effective rate of interest they charge, ensure that no security is sought for loans and no coercion is used for recovery. Non-compliance will be punished with a three-year prison term and a...