Indian Microfinance: The Challenges of Rapid Growth

This is the first comprehensive account of various components of the Indian microfinance sector, the largest in the world. After reviewing the main challenges facing the sector, it analyses the progress of the two main delivery models, issues relating to the emerging microfinance services of micro-insurance and money transfers, ongoing efforts in training and capacity building, opportunities facing commercial financers such as bankers and social venture capitalists, the remaining need for development financing, and ongoing research in the sector. The main challenge facing the sector is identified as the need to enhance borrower, public and regulatory support and understanding, by increasing transparency in dealings with borrowers, and by ′educating′ the public on why microfinance interest rates have to higher than bank lending rates if microfinance institutions are to recover costs and attain viability. Failures in both these areas led to a highly publicized attack in 2006 on the sector by the state government of Andhra Pradesh. While the sector weathered the storm, it needs to take serious note of the lessons, which are analysed in a separate chapter. The book will be of interest to various players in the sector including practitioners, bankers, insurance companies, venture capitalists, regulators, donors and academics. Given heightened interest in the sector with the Nobel prize awarded to Muhammad Yunus and the Grameen Bank, it will be of even greater interest than before to the intelligent layman and the development community generally.

Table of Contents:
Overview and Summary of Main Recommendations Progress Under the SHG Bank Linkage Programme Progress under the Microfinance Institution (MFI) Model MFIs: Learning from the Andhra Pradesh Crisis Diversifying Microfinance Services Microinsurance Money Transfer Services Training and Capacity Building Financing Commercial Lending to MFIs by the Commercial Banks Equity Investments by the Venture Capital Funds Financing Developmental Apex Financial Institutions: Growing the Seeds and Saplings Donor Participation in Indian Microfinance - Rewa Misra Some Ongoing Research on Indian Microfinance - Annie Duflo and Colleagues

About the Author :
Prabhu Ghate is an independent researcher, journalist and consultant, based in New Delhi, with a Ph.D. in public policy from Princeton University. While on study leave from the IAS, he conducted extensive field work on anti-poverty programmes in eastern Uttar Pradesh, and authored Direct Attacks on Rural Poverty: Policy, Programmes, and Implementation (1984). Thereafter, as a Senior Economist at the Asian Development Bank, Manila, he anchored a six-country comparative study, Informal Finance: Some Findings from Asia (1992). He has worked in many countries of Asia in the areas of rural and financial development, has a number of journal articles to his credit, and writes frequently for Economic and Political Weekly and The Economic Times.