The AP microfinance crisis 2010: discipline or death?

Abstract

On October 15, 2010, the news that the Andhra Pradesh (AP) government had passed an ordinance to regulate the microfinance activities in the State pushed all the MicroFinance Institutions (MFIs) with huge exposure to AP into a huddle. The microfinance sector had seen a high and a low in a short timespan. In July 2010, the largest MFI – SKS Microfinance – had a successful initial public offering (IPO). The same year, a series of controversies (including some unrelated to each other) culminated in the ordinance passed by the State Government. This ordinance threatened the very existence of for-profit MFIs. Suddenly, a fairytale had turned into a nightmare.