The size of MFI business in India is some 30,000 cr, that's one STFC/LICHF. Big, but by no means too big to impact the system. In the context of the financial market today, this is literally small change. Of this some 10,000 cr is in Andhra which was almost dead, so one can understand why form a financial market integrity perspective the RBI is not concerned and hence deafeningly silent on the issue. But the MFI business is much more than a business, there was a reason why Andhra started using the SHG model to lend out money at 3% pa in the first place.
According to the Oxford Poverty and Human Development Initiative, more people live in poverty in eight Indian states than in 26 of sub-Saharan Africa’s poorest countries. While incomes are rising in India, human development indicators measuring health and nutrition are not to the same degree and remain some of the world’s worst. India has the world’s largest population of poor people. The solution for coming out of poverty is the same which everyone from them to Mukesh Ambani uses, which is save/borrow, invest for productive purposes which generates a surplus after paying all the economic charges and repeat the cycle. While the MFI industry did not go beyond loans, they did reach a surprisingly large number with loans. The people who they reached are the ones who were paying super high rates to moneylenders and in some cases absolutely unable to borrow, these guys have been given a hope by the industry and this fact should not be forgotten under the influence of SKS's IPO.
This industry did a lot of things that the government after 60 years could not. The benefits of this industry must be looked at holistically and not only from a financial market and profitability perspective.
