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How Consumer Bankruptcy Reforms Can Help Save Microfinance In India, David E. Solan
How Consumer Bankruptcy Reforms Can Help Save Microfinance In India, David E. Solan
David E Solan
The microfinance industry, once touted as one of the best hopes for alleviating poverty in rural India, faced a near collapse in the winter of 2011 as nearly all borrowers in Andhra Pradesh, one of the largest states in India, stopped repaying their loans. This borrower backlash was fueled by widely reported stories of farmer suicides and unscrupulous lending practices. Politicians have responded with populist legislation aimed at curtailing microfinance in India—for example, by capping interest rates. The Article argues that these proposals are misguided in that they would constrict lending to poor villagers.
The Article questions why Indian policymakers …