No:WP-2011-025

Author:Shubho Roy, Renuka Sane, Susan Thomas

Title:An economic policy and legal analysis of The Micro Finance Institutions (Development & Regulation) Bill, 2011

Abstract:

In response to the Second Micro Finance Crisis in Andhra Pradesh, which took place in October 2010, the Ministry of Finance has pro- posed a new Micro Finance Institutions (Development & Regulation)Bill. This paper undertakes a detailed analysis of the draft Bill in terms of both economic policy and law. This analysis reveals many weak links, including: a lack of clarity on the objectives of the Bill; an insufficient focus on protection of the rights of the micro-borrower; lack of clarity about the definition of thrift; the loss of accountability that comes with multiple regulatory agencies; concerns about the rule of law; and constitutional issues about powers of the Centre versus the State Government.

Key words:microfinance, regulation, crisis resolution, consumer credit, consumer protection, regulatory object

JEL Code(s): G20, G21, G28, K12, K23

Weblink: http://www.igidr.ac.in/pdf/publication/WP-2011-025.pdf