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Microfinance: Lessons from a Crisis
The rural distress in Andhra Pradesh has been more than evident in reported incidents of farmers' suicides and hunger deaths. The incidence of indebtedness, particularly among small and marginal farming households in the state, is the highest in India. By passively encouraging microfinance institutions to expand without limits in a policy and institutional vacuum, the state had created the conditions for a crisis. This is the time for finding out the pros and cons of completely trusting a credit-based poverty reduction strategy to the neglect of more critical structural and institutional solutions.
COMMENTARY
| Microfinance: Lessons | operation of the MFIs in the state. The ordi |
| nance, among other things, requires MFIs | |
| from a Crisis | to register themselves, and prevents lend |
| ing in cases where loans are already out | |
| standing. It allows for only monthly repay | |
| ments and demands the display of interest | |
| Tara S Nair | rates charged by the MFIs. Even as the |
The rural distress in Andhra Pradesh has been more than evident in reported incidents of farmers’ suicides and hunger deaths. The incidence of indebtedness, particularly among small and marginal farming households in the state, is the highest in India. By passively encouraging microfinance institutions to expand without limits in a policy and institutional vacuum, the state had created the conditions for a crisis. This is the time for finding out the pros and cons of completely trusting a credit-based poverty reduction strategy to the neglect of more critical structural and institutional solutions.
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