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Nothing wrong with that, except that it created a preference for SHGs over MFIs throughout the state government.
The sole direct support from the Indian government to the MFIs, the priority sector lending targets, actually contributed to the excessive growth.
It prompted the public and private sector banks to make large loans to MFIs with relatively little scrutiny, allowing MFIs to grow quickly without enough ballast in the form of institutional capacity building or a solid capital base.
As a finishing touch, one could cite the undermining of the MFIs' legitimacy in the public eye created by government's vacillating stances toward interest rates and occasional politically-motivated decrees of debt forgiveness.
The NGOs kept the focus on the mission, while the international social investors contributed a commercial orientation, also tempered by social mission.
In Indian microfinance, NGOs are prohibited from becoming shareholders.
These cases underscore rising debt stress among possibly tens of thousands of clients, brought on by explosive growth of microfinance organizations in southern India.
In the quest to meet their growth targets, loan officers often sell loans to clients already indebted to other organizations.
Then perhaps we could talk about sharing the credit rather than the blame.Instead, authorities accepted a romantic notion that client ownership would create grassroots accountability, but this actually created a governance void.SKS, for example, established a client trust that gave clients a monetary stake in the company but left the voting rights to the founder/managers.This range of policies results from a combination of complex factors, and is much influenced by India's socialist history and popular politics.Many leaders within both the Reserve Bank of India and the Ministry of Finance have sought to create a better policy environment.