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The micro-loan recovery agents were due to come knocking
by the end of that week.
She did not wait for them.
--Soutik Biswas, BBC News, Andhra Pradesh
Two lines that matter-of-factly sum up the tale – not just
of a life lost but also of an industry gone horribly wrong - an
industry plummeted into a crisis by the loss of the very lives
that it swore to elevate! The year 2010 saw the Indian micro- finance
industry suffer a crisis of faith that questioned the very basis
of its existence. In October 2010, The Government of Andhra Pradesh, a state often
described as the micro-finance capital of India, reported that as many as 54 people
had committed suicide due to harassment related to debt repayment. For a country
that is yet to recover from the agrarian crisis that continues to claim the lives
of farmers at a regular rate, this was yet another body blow! The champions of the
downtrodden had turned into agents of oppression and harassment - or so it seemed!
Did the angels actually turn demons? Was this India’s sub-prime? And why did such
a fate befall an industry that even during the global economic crisis was the darling
of bankers and investors worldwide? Ramesh. S. Arunachalam offers an objective ringside
view into the ways of functioning of the industry even as he provides numbers to
substantiate the enormity and the implications of crisis, born primarily out of
the pressures of commercialization and incentives gone terribly wrong, the lack
of sufficient regulatory/supervisory attention and the rigid and impractical stand
of some state governments. He turns the crisis into a learning opportunity, touching
on critical issues - like corporate governance, MIS, internal controls, risk management,
compensation, regulation/supervision, financial inclusion and several other aspects
- that came up during the churning! A framework of suggested remedial measures,
which brings up the end, highlights practical action steps that need to be taken
if the industry is to regain its credibility as a prime mover in the area of development
and inclusive growth!
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The
Journey of Indian Micro-Finance: Lessons for The Future
