ABSTRACT
Microfinance, involving extension of small loans and other financial services to low-income groups, is a very important economic conduit designed to facilitate financial inclusion and assist the poor to work their way out of poverty. Microfinance institutions (MFI) need to seriously examine their governance systems and align their practices with the overall objective of microfinance which is to facilitate financial inclusion and empower poor. Governance would encompass self-regulation both at the individual entity level and at industry level through the self-regulatory organisation mechanism. The MFI episode in India has, at least, two close parallels with the subprime crisis of 2008. Intentions need to be adequately backed by sound framework of governance and regulation. In this context, add that as per Credit Information Companies Act, 2005, non-banking financial companies, as credit institutions, were required to be members of at least one credit information company. The rating of MFIs assumes critical importance as MFIs are sourcing financing from banks and other institutions.
