India is the biggest, fastest-growing microfinance market anywhere. And it's at risk of hitting a bad crisis. This will be surprising if you haven't been paying attention to the global press for the past 3 weeks. The last big microfinance news from India centered on the millions of dollars earned by investors following the SKS IPO. Vinod Khosla made the front of The New York Times for his $100 million plus pay-day.
Just a few weeks ago, most of the who's who of microfinance in India got together for a conference in Mumbai. The agenda gives no sense of what the rest of October would bring.
But a spate of suicides by microfinance customers, in response to alleged harassment by microfinance loan collectors, has turned attention back to conditions in villages -- and it's not all pretty. Regulators are now rushing to clamp down on microfinance institutions.
Shloka Nath has the best piece I've read, online today in Forbes India:
"Vijay Mahajan's morning walks are interrupted by neighbours who question him about the recent controversy around MFIs. They want the man regarded as the father of microfinance in India to explain why there are so many suicides related to MFI lending. "I feel like my whole life's work is turning to ashes. I've spent the last two weeks, just running to regulators and government officials, defending microfinance," says the founder and chairman of BASIX, India's first microfinance company, and president of the Microfinance Institutions Network (MFin).
"He is not often given to words as strong as these. But then the microfinance sector hasn't seen times like these. From one angle, these are the best of times. Microfinance is as hot as the tech sector was 10 years ago. Valuations are crazy. It's poster child SKS Microfinance has just listed on the stock exchanges at a handsome premium. Investors want a piece of any half-decent microfinance outfit if ongoing capital-raising is any indication.
"These are also the worst of times."
Read the unfolding story here.
The Indian microfinance sector is full of visionary, hard-working leaders, Vijay Mahajan among them. It's important to take the emerging concerns seriously, and also to hold onto the early vision and promise of new opportunities in poor communities that spurred the initial growth of microfinance in India.
Other useful sources (hat tip: Shloka Nath) -
1) MINT- http://www.livemint.com/articles/2010/10/26234528/The-Microfinance-Mess.html
2) MINT- http://www.livemint.com/2010/10/13222332/Nabard-set-to-regulate-smaller.html
3) AFP - http://indiamicrofinance.com/indian-microfinance-sector-701803.html
4) http://indiamicrofinance.com/sks-reduces-interest-rates-2901793.html
5) DNA - http://www.dnaindia.com/money/report_narayana-murthy-speaks-out-wants-akula-to-be-open-and-fair_1458342
6) Swaminathan Aiyer - http://swaminomics.org/?p=1907