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The role of government in India's micro-finance industry

Renuka Sane () and Susan Thomas ()

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: Recent events in India have brought a fresh focus upon the problem of regulation in the field of micro-finance. This paper delineates the three distinct aspects where government needs to play a role. The first is to protect the rights of the micro-borrower, the consumer of micro-financial services. The second is that of prudential oversight of risk-taking by firms operating in micro-finance, since this could have systemic implications. The third is a developmental role, emphasising scale-up of the micro-finance industry where the key issues are diversification of access to funds, innovations in distribution and product structure, and the use of new technologies such as credit bureaus, the UID and mobile-based payments. Each of these roles need to be placed in an existing or a new regulatory agency. There is a case for creating a new regulatory agency which unifies the consumer protection function across all financial products.

Keywords: financial services distribution; consumer protection; credit bureaus; securitisation (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mfd and nep-reg
Date: 2011-03
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