Micro Finance Institution Regulation:Case for Hybrid DNA Institutions

This paper is positioned to discuss a 'right-fit' institutional arrangement for the microfinance sector in India. The discussion focuses on the underlying concepts and the importance of Hybrid-DNA microfinance institutions. It also examines the significance of the people-centric and calibrated response of NABARD, in creating such an institution. This paper does not analyze the merits or otherwise of the Microfinance Regulation and Development Bill. The more erudite in the realm of financial sector regulation will certainly ensure that a robust regulation will eventually replace the present vacuum. State may also come up with stringent enforcement and legislations to rope in rogue elements in the sector. The paper proposes to highlight that robust regulation, supporting legislations and stringent enforcement will not be the end of major threats to the sector. Several challenges that remain are a product of a non-sync between some of the more technical aspects of regulation and the demand side conditions in terms of the level of satisfaction possible from the regulated entities.