The Andhra Pradesh Crisis: What Should MFIs Do?

• by Graham Wright and Manoj Sharma
• Dec 13, 2010
• 1 min
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This note examines the nature of the shake-up and likely consequences including interest rate caps, sources of capital, equity valuations and the worst case scenario

Clearly the microfinance, or better said “microcredit”, industry in India is undergoing a major shake-up. This note examines the nature of the shake-up and likely consequences including interest rate caps, sources of capital, equity valuations and the worst case scenario. It concludes that long-term the current turmoil in Indian microfinance may result in improved financial services for the poor – so long as they are easily accessible and not in high cost to operate areas. In the short run the options for poor people will shrink significantly – much to their detriment.