National Microcredit meeting begins in India

A national conference of microcredit lenders is underway in India. It's the first time that leaders have gathered together since the controversy in Andhra Pradesh. A year ago several microcredit borrowers in the Indian state committed suicide. Authorities alledge that the victims were over-indebted to microcredit and killed themselves because they were unable to pay their loans. The suicides began a government effort for more regulation over microcredit and many banking leaders say they welcome it.

From the Wall Street Journal, writer Vibhuti Agarwal describes collected some quotes from the conference.

Jayashree Vyas, of Sa-dhan, the industry association that sponsored the conference, also underlined the need to get “closer to the clients and ensure ethical lending and recovery practices.”

Many microlenders said it was vital to have national-level regulation.

In a report released in January, India’s Reserve Bank proposed certain measures that could form the basis of such regulation, including capping interest rates for loans to save borrowers from exploitation.

The Economic Survey that was released last month also directed the government to take steps to ensure that borrowers understand the terms of contract when they borrow from microfinance institutions.

Shashikant Sharma, a senior bureaucrat in India’s finance ministry, promised that microfinance was high on government’s agenda for financial inclusion.

“The sudden and rapid growth of microfinance institutions has given rise to lending malpractices. A strong and effective regulation of the sector is therefore imperative to put the sector on the path of providing inclusive growth,” he said.