Haseeb Drabu, former CEO of Jammu and Kashmir Bank, a bank owned by the Indian state governments of Jammu and Kashmir, recently wrote an article published on the LiveMint website calling recent efforts by authorities to rein in the Indian microfinance industry “flawed”.
Mr Drabu argued that the National Bank for Agriculture and Rural Development (NABARD) [2], is not a suitable institution for supervising the microfinance industry as NABARD itself is also in the microfinance business, introducing the potential for significant conflicts of interest.
Mr Drabu complains that the current drive to regulate the microfinance industry is misguided because “it will be not just myopic, but also detrimental if the regulatory edifice is built around the issue of high interest rates”. He explains that tight regulation on interest rates tends to benefit unspecified special interest groups rather than low-income groups, and thus argues that interest rates should be liberated, not regulated.
About the National bank for Agriculture and Rural Development (NABARD):
The National Bank for Agriculture and Rural Development (NABARD) is a development bank in India that formulates the credit and banking policy for the rural sector, supervises and conducts on-site inspections of cooperatives and regional rural banks and promotes the development of microfinance activities in the rural sector. NABARD is charged with the oversight of the Microenterprise Development Programme (MEDI), which focuses exclusively on the development of microenterprises. In 2010, NABARD set a fiscal year target of INR 3,750 billion (USD 80.3 billion) for credit disbursement via commercial banks, state cooperative banks, state cooperative agriculture and rural development banks and other eligible financial institutions up from INR 3,250 billion (USD 69.6 billion) the previous year.
By Trevor Kwong, Research Assistant
Sources and Additional Resources:
[1] Source Article: LiveMint: First reform, then regulate:
http://www.livemint.com/2010/10/31193633/First-reform-then-regulate.html?h=B
[2] MICROCAPITAL BRIEF: Indian Government Ponders Role of NABARD in New Microfinance Regulatory Framework:
[3] MicroCapital Universe: National bank for Agriculture and Rural Development (NABARD):
https://www.microcapital.org/microfinanceuniverse/tiki-
index.php?page=National+Bank+for+Agriculture+and+Rural+Development+(NABARD)
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/tiki-index.php
Similar Posts:
- MICROFINANCE PAPER WRAP-UP: “Microfinance in India: Issues, Challenges and Opportunities;” by Mohammad Abu Saleh, Zubair Ahmad
- MICROCAPITAL BRIEF: SBFC Raises $18m from Amansa for On-lending to Small Businesses, Households in India
- MICROCAPITAL BRIEF: Light Microfinance, IppoPay Partner to Offer Digital Lending to MSMEs in Rural India
- MICROCAPITAL BRIEF: IDB Invest Lending $30m to Atlantic Bank in Support of MSMEs in Belize, with a Focus on Women-owned Firms
- MICROCAPITAL BRIEF: Microfinance Institution PEBCo-Bethesda of Benin Borrows $2m from Incofin via Agricultural Liquidity Fund
