Business News | Microfinance Sector Must Prioritise Responsible Lending, Sustainable Growth After Crisis: IIM Bangalore Professor
Get latest articles and stories on Business at LatestLY. The microfinance sector must moderate its growth and focus on responsible lending to prevent borrowers from falling into debt distress, as rapid expansion and multiple borrowing have contributed to repayment difficulties in parts of India, M.S. Sriram, Professor at IIM Bangalore, said.
New Delhi [India], October 9 (ANI): The microfinance sector must moderate its growth and focus on responsible lending to prevent borrowers from falling into debt distress, as rapid expansion and multiple borrowing have contributed to repayment difficulties in parts of India, MS Sriram, Professor at IIM Bangalore, said.
Speaking on the sidelines of the 21st Annual National Conference on Inclusive Growth, themed around microfinance, Sriram said the sector's rapid growth in recent years had led to a crisis in certain regions, highlighting the need for a more sustainable approach to lending.
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"The problem with microfinance is that it has had very rapid growth in the past years and as a result of which has resulted in some sort of crisis because of over-lending," he said.
He noted that borrowers in some parts of the country had experienced financial distress after taking loans from multiple sources and subsequently struggling to repay them.
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The discussions at the conference focused on how the sector could moderate its expansion and adopt more responsible lending practices, particularly for low-income borrowers.
Sriram said the annual conference provided a platform for different stakeholders, including the Reserve Bank of India (RBI) and microfinance institutions, to exchange views on challenges facing the sector and explore ways to move forward following the crisis.
Highlighting the importance of engagement between lenders and regulators, he said discussions with the RBI helped both sides understand the challenges facing the industry as well as the realities on the ground.
He referred to concerns raised by RBI Executive Director Keshavan Ramchandran regarding whether the benefits of the sector's growth were reaching its customers.
"With increased competition, should there be reduction of interest rate particularly for the poor people and so on? That's what we discussed during the forum," Sriram said.
The discussion also examined the relationship between the sector's growth, profitability and its social impact, with particular emphasis on ensuring that expansion translates into tangible benefits for borrowers.
Sriram said such interactions were important for facilitating an exchange of perspectives between the regulator and microfinance institutions, allowing policymakers to better understand field-level realities while addressing concerns around lending practices.
He emphasised that the sector needed to pursue growth in a sustainable manner, with responsible lending and borrower welfare remaining central to its approach.
The conference brought together stakeholders to deliberate on the challenges facing microfinance and ways to strengthen its contribution to inclusive growth. (ANI)
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