Two Sessions In...

The Sa-Dhan conference on microfinance has completed two sessions and already a few themes have emerged. The first has been a resounding call for regulatory reform in India. Dr. Mohammad Yunus spoke during his inaugural address about the journey Grameen Bank tread in Bangladesh and how some of the tribulations and challenges he faced could be applicable to the Indian context. He spoke of how existing microfinance regulations in India have the, “architecture of a super-tanker,” a nod to how many regulations are designed for larger entities rather than MFIs; he advocated regulation with the “architecture for a dinghy boat,” for microfinance. Without the needed regulations, the majority of microfinance providers in India cannot mobilize deposits. Yunus spoke passionately about how in Bangladesh, Grameen Bank worked with politicians to create a law specifically for its operations, the Grameen Bank Law, in 1983 which allowed the fledging institution to take on savings. Since the passage of this regulation, Grameen Bank could leverage its deposits and erase the fear of bending to the will of outside providers of capital. He urged India to follow the same example. Other speakers such as Vijay Mahajan echoed Yunus’ statements for regulatory reform. Regulation was framed by many speakers as a binding constraint for continued maturation of the sector.

A second refrain, which one might expect, is reference to the global financial mess. Many of the speakers took time to point out the lessons learned from the crisis, such as the conflation of financial markets’ value with the value of the “real economy,” and the error in expecting financial services as a business model to reap high margins.

To be continued….