Microfinance sector must prioritise savings and insurance over credit to prevent recurring crises, Chief Economic Adviser V Anantha Nageswaran said, warning that excessive lending and mis-selling have contributed to repeated problems in the industry.
Speaking at Sa-Dhan's 21st Annual National Conference in New Delhi, Nageswaran said microfinance institutions need to move beyond lending and focus on building sustainable livelihoods and financial security for low-income households.
"I think even within the microfinance institutional space in this country, I know that there have been in the past microfinance institutions which have, using their connections with the families at the rural level, addressed livelihood issues other than simply providing credit," he said.
Nageswaran argued that the sector's approach to financial services needed correction, with savings and insurance taking precedence over borrowing.
He said the sector had reversed this order, adding, "There are frequent bouts of over-lending and mis-selling, which should be avoided." (ANI)
