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Microfinance India: State of the Sector Report 2009

Overview of the latest developments in the microfinance sector
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This report describes the state of the Indian microfinance sector in 2009.

The Indian microfinance sector is delicately placed in the larger political economy. It has to learn to adjust to aftershocks of the meltdown that affect its clientele. It must also cope with the possibility of hardening interest rates and lack of head room to re-price its loans to poor clients. The microfinance sector in India in the past year has had to:

  • Meet political expectations;
  • Deal with customer fatigue resulting from worn-out loan products and processes;
  • Harness growth potential with efficiency and low costs to customers;
  • Work at a dizzying speed due to the competition for market share and new geographies;
  • Concentrate on the mitigation of political risk.

The report suggests that the time has come to abandon unbridled competition and come together for formulating sector-wide strategies that protect institutions and regulate their conduct. The recent problems of the sector demand a better regulatory dispensation than what is proposed. MFIs'’ internal policies on client acquisition, customer relationship and incentive structures need to be set right in addition to external risk containment.

About this Publication

By Srinivasan, N.
Published