Microfinance in India. How skewed is the system?

Vikram Akula, Founder, SKS Microfinance

On October14 this portal reported that 30 microfinance borrowers in Andhra Pradesh have recently committed suicide.

At about the same time offices of several micro finance companies in AP were attacked and vandalised by people protesting exorbitant interest rates and harassment by loan collectors.

Is this just a dark edge to efforts for ensuring ‘inclusive markets’ and ‘financial inclusion’? Or do these events call for serious introspection about these buzz terms?

At present the flurry of accusations and explanations about the microfinance sector is dominated by operational details – questions about what are ‘valid’ costs and profits vs. profiteering.

Similarly,the uproar for or against the ordinance issued by the AP government, to address the problems in microfinance, is mostly focused on the operational implications of a sector that has been growing exponentially.

In 2008-09, outstanding loans of microfinance institutions increased by 97 per cent over the previous year to Rs 11,734 crore (Rs 117.34 billion).
more at rediff