New Year's Reflections on the State of Indian Microfinance

Like me, Sanjay Sinha, the director of the microfinance rating agency M-CRIL, sees the speed and nature of growth in India's microfinance sector as a core cause of the debacle in Andhra Pradesh in late 2010. He's written an article on microfinancefocus.com reflecting on these and other lessons.He closes with a warning to the rest of the world:

In recent years, many countries – Bosnia, Morocco, Nicaragua, Pakistan amongst others – have suffered microfinance crises for similar if not the same reasons. Unfortunately, many more – Cambodia, Georgia, Nepal, Nigeria, the Philippines – are also ripe for such troubles if corrective action is not taken. The fate of the Indian charging bull has caused some sober reflection; but there is an overwhelming tendency in international development for local operators to plead regional uniqueness as a reason for not learning lessons from others. MFIs everywhere would do well to learn the lessons of the Indian crisis. The issues discussed here are mainly generic; becoming a charging bull is not the path to long term success, the key is to understand how to evolve from a nimble hare into a sleek mare.