Addressing Gender Concerns in the Microfinance Institutions (Development and Regulation) Draft Bill 2011

17 Aug 2011


The report summarizes findings from an expert group consultation on the gender implications of the Microfinance Draft Bill 2011.The consultation, organized by Gender community of the Solution Exchange with support from UNDP India, also outlined a range of recommendations for empowering women through the Bill.


The Microfinance Institutions (Development and Regulation) Draft Bill 2011, represents a step forward in the Government of India’s (GoI) engagement with the Microfinance (MF) Sector. The Bill, prepared by the Ministry of Finance, has been put up on its website, inviting feedback and comments from various stakeholders and microfinance practitioners.


1.2 The Indian Microfinance Sector has seen a diverse array of microfinance providers (e.g. Non-Banking Financial Companies (NBFC), Microfinance Institutions (MFIs), Cooperatives, Non-profits, Trusts) proliferating over the past two decades. However, a few practices of microfinance institutions such as high interest rates, short repayment schedules, coercion to ensure timely repayment have come under the scanner due to an increasing over-indebtedness of women. This led the Government of Andhra Pradesh to pass an ordinance to control such practices. The need for regulation of MFIs thus gained ground. At the same time, MFIs felt that they had not been able to grow due to stringent regulations imposed on banking and non-banking companies. For this reason, they have also been lobbying for a special regulation for MFIs.


1.3 In view of the criticism of the provisions of the Bill, the first Draft Microfinance (MF) Bill which was released in March 2007 was referred to a Parliamentary Standing Committee. However, due to the end of the term of the Parliament, the provisions of the Bill could not be deliberated. The Bill was therefore drafted once again in 2011. It defines microfinance services broadly - financial services in small amounts including microcredit, collection of thrift, remittances, pensions, insurance and so on - and brings all organisations - except cooperatives only accepting deposits from their members, under the purview of one regulator - the Reserve Bank of India (RBI).


1.4 It was felt that regulations of the Bill should take into account the concerns of the poor while promoting the microfinance sector. There are also ongoing discussions on how to bridge the two kinds of gaps in the sector- development gap (financial exclusion of large sections of the population) and regulation gap (lack of regulation of many MFI/NGOs operating in the informal sector to provide financial services).


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