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Just right now, a severe microfinance crisis appears to be brewing in Southern India. A large number of suicides has led to a legal clampdown and a corporate backlash. With a complaint launched by microfinance institutions (MFIs) at the Andhra Pradesh High Court in Hyderabad against the Andhra government, the recent conflict over MFI practices and borrowers’ debt levels – debt which may be responsible for the deaths of over thirty people – has come to a head. How this case develops is bound to shed light onto what actually matters in microfinance in India today. Bluntly: is it power, profits or people?

Flashback: In August and September, nineteen microfinance borrowers in Andhra Pradesh (A.P.) took their lives because of overindebtedness blamed on microfinance – some reports say more than 30 (or even 57; see updates below). Then, in early October, the debt-driven suicide of a fruit-seller named Prabhakar in Kurnool, southern A.P., triggered public outcry and attacks on several MFI offices.

On October 14th, the A.P. state government “brought an ordinance making it compulsory for MFIs to register themselves, declare the effective rate of interest they charge, ensure that no security is sought for loans and no coercion is used for recovery. Non-compliance will be punished with a three-year prison term and a fine of Rs 1 lakh.” In response, yesterday a consortium of MFIs operating in A.P., MFIN, filed a petition at the Andhra Pradesh High Court seeking an order to squash the ordinance issued by the government (NDTV, AP). Meanwhile, another overindebted microborrower, K. Narayana, who was harassed by the agents of four MFIs, took his life by drinking poison.


Video: “The microfinance institutions hit back,” questioning A.P. government’s power of jurisdiction.

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The Book

Governance across borders: transnational fields and transversal themes. Leonhard Dobusch, Philip Mader and Sigrid Quack (eds.), 2013, epubli publishers.
October 2010
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