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What should regulation do in the field of micro-finance?

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 on the appropriate regulatory stance towards micro-finance. In this paper, we review facts and recent experience about Indian microfinance. We analyse the puzzles of financial regulation in this field from first principles, and argue that the mainstream mechanisms of consumer protection and micro-prudential regulation need to be modified owing to joint-liability groups. From this perspective, we suggest regulatory strategies that need to be adopted for dealing with micro-credit and financial distribution that focuses on the poor. This analysis and conceptual framework also helps analyse the two policy responses till date, the Malegam report and the draft Microfinance Bill, 2011.

Keywords: Micro-finance; micro-credit; joint-liability-groups; India; consumer protection; regulation (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-03
New Economics Papers: this item is included in nep-ban, nep-hme and nep-mfd
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