The Politics of the Microfinance Crisis in Andhra Pradesh, India

In: https://doi.org/10.7916/D8D21VM7

Abstract

The microfinance crisis in Andhra Pradesh incited controversy worldwide between those who supported and those who discredited the industry's ability to alleviate poverty. Many reporters defamed for-profit microfinance institutions (MFIs) as opportunists, and claimed that their fundamental deficiencies victimized the poor. This paper refutes this claim and suggests instead that the incompatibility of MFIs with the political system in Andhra Pradesh was the driving force behind the crash. A comparative analysis of the development of microfinance markets in Latin America, Andhra Pradesh, and Karnataka, and a study of the political actors involved in the industry reveal that the crisis was primarily precipitated by political rather than fundamentally economic factors.