A Wall Street Journal blog says that:
Backlash against the booming microfinance industry that has thrown Andhra Pradesh into crisis may be spreading to the Mecca of Microlending: Bangladesh.The south Asian nation’s Microcredit Regulatory Authority is planning to slap new restrictions on the industry which gives tiny loans to mini entrepreneurs.The government regulator wants to cap interest rates on the loans at 27% and also dictate the maximum fees microlenders are allowed to charge, according to local reports.The new rules, set to start from next July, would also force microlenders to give borrowers a 15-day grace period on loan repayments and make lenders drop requirements that borrowers put part of their loans in savings.
Certainly the Andhra Pradesh and Bangladesh microfinance scenes are alike in important ways. In both, there are handful of big lenders and then countless small ones that blur the boundary between "microcredit." In both, there is friction between the leaders of the big microfinance institutions (MFIs) and the government. In both, use of microcredit is widespread---as is borrowing from multiple creditors, to nervous-making degree. A repayment crisis in Bangladesh someday is not inconceivable.But there are some big differences. In India, the government is (literally and figuratively) invested in a rival model for delivering financial services to the poor, the Self-help Group, in a way that has no analog in Bangladesh. The big MFIs in Bangladesh will probably have little trouble complying with the new rules because, I think, they largely do already. The main effect, and perhaps quite a good one, may be to weed out smaller institutions that do not treat their customers as well. Moreover, the new rules have been proposed months in advance. And they do not threaten the industry with an electroshock-induced heart attack.Also, it should be said, the rules come out of a process dating to before the Andhra Pradesh eruption. This is not an example of a financial crisis leaping borders.
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