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  Seminar Proceedings

      • Round Table on Micro Finance – Regulation and Governance, 1st July, 2006.

Title - Governance of Micro Finance


The recently conducted Round Table on Microfinance Institutions by the Indian Institute of Economics, Hyderabad discussed at length issues relating to Governance and regulation, with participation by all the stakeholder groups, regulators like the RBI, NABARD, academicians and researchers.  The Round Table assumed significance in the wake of some of the MFIs resorting to unfair means of recovery and usurious rates of interest on their financial products.

The debate, interalia, covered pros and cons of regulation, need for more self governance, promotion of more MFIs for providing cost effective services to reach the unreached, infusing professionalism in their approach and methods of practices, provision of training and skills to the clientele for pursuing appropriate livelihoods and necessary market support etc.  More than financial, sociological factors are to be kept in view while dealing with the customers who are mainly below the poverty line and joining the economic stream for the first as a small entrepreneur.  While there is an imperative need for a clear cut definition of M.F.I. before initiating any regulation, the basic principles of transparency, accountability and sustainability are echoed by the Round Table Conference with full voice.

While welcoming the participants, Dr.B Yerram Raju, Director, Indian Institute of Economics emphasized, among other points, on the need for a wider debate on the proposed legislation regarding microfinance contemplated by the Govt of India, particularly with an interested party framing the legislation, namely the NABARD.
A near unanimity was noticed in the recommendation that interest rates should be affordable by the target group.  The risk content can be cushioned and price brought down by the MFIs reaching out to the rural poor by packing a variety of services along with the loan and insurance.

 The representatives of the Reserve Bank of India mentioned that the MFI Boards should be broad-based with a few professionals as independent directors.  These institutions should be keen to preserve an agenda of social as well as economic action unlike others solely governed by profit.  In view of the professionalism and costs associated with it, State intervention may become necessary at the macro level.  It was felt that the MFIs should grow into messo finance institutions with high volumes and deeper penetration than now.  They have their relevance and should continue to bridge the rural urban divide, it was felt.  The stakeholders desired that the new legislation proposed by the Finance Ministry should be put on public information for accommodating their views on aspects governing governance and regulation.

Apart from NGOs, MFIS academicians, Administrative Staff College of India, State Govt officials, the conference was participated by the senior representatives of RBI, NABARD, SIDBI, Commercial Banks etc. Dr.Jalma Rao,  proposed vote of thanks.
Summary of proceedings/recommendations of the Round Table will be issued to all the concerned for information and for initiating necessary action for shaping the micro finance movement on sound lines to elevate the lives of rural and urban poor to join the economic stream.





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