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Banking Bill and Microfinance

Banking Bill and Microfinance

The influence of the banking bill on the growth of microfinance.

The French national Assembly’s review of the banking bill reveals overarching structural measures in virtually all areas of banking. Yet this commendable piece of legislation designed to uphold the moral practices of our cherished banks does not necessarily reflect the realities of a global banking system that aspires to financial inclusion of the poorest in our society – something microfinance has been doing for several years.

But is microfinance the right model? In brief, “social” banking serves its customers and national economies. At this point it would be all too easy to question the need to develop a heavy set of global regulations backed up by law. Don’t be too sure! Remember the events in India in 2010 when micro finance institutions in the State of Andhra Pradesh were accused of abusive practices when granting loans to people in need. Strong arm tactics to recover loans were also believed to be the cause for an unprecedented wave of suicides in the sub-region.

It is clear that whatever the sector, ethics and morals that govern our financial system cannot be taken for granted. The answer to these problems is, to a large extent, contained in the Banking Bill. However, stronger governance is needed, a point that is lacking in the Banking Bill.

Max Dongar, Partner based in Paris

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