Renuka Sane, Susan Thomas
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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. |