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on the draft bill that seeks to set microfinance right

With the Finance Ministry completing its draft Microfinance Institutions (Development and Regulation) Bill, another large piece of the puzzle on how to regulate Microfinance Institutions has fallen into place.

It has been a tough puzzle to crack. In the beginning of last year, when complaints about women being pushed into debt traps were gathering pace, the RBI and the FinMin were flummoxed by the diverse array of microfinance providers – NBFC-MFIs, co-operatives, non-profits, trusts – all answering to different regulations. The business itself, built around multiple, small transactions in farflung areas, made it hard to verify claims about collection methods and interest rates.

Today, looking at the draft Bill, it is evident that the FinMin has managed to find a way out of some of these perplexities.

needless to say, the bill is not perfect. but, then again, bills rarely can be in a rambunctious democracy given the need to accommodate diverse viewpoints. further, it has just been opened for comments. so, now to see how it evolves from here on. for now, the main thing is, a regulatory regime for the MFIs is gradually taking shape. the journey so far, here, here and here.

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