The Need for Corporate Governance in MFIS in India: An overview

Over several decades of the socialistic favored economy, a large parallel black economy has been developed in India where transactions are carried out in cash and are not recorded in the of account books properly. Though there have been several honorable exceptions, many Indian business groups have succumbed to tempt of black money. The available literature on black money views that it was primarily as a means of cheating the government of its legitimate dues. But to the fact that it is not accounted for in the company's books, which means that it is also cheating the minority shareholders. There is a standard joke among bankers in India that there are many financially sick companies but no financially sick promoters.

As the same the MFI episode in Andhra Pradesh has too many crises than all over the Indian states, which lead to too many customers of MFIs are left their lives for an account of too much of interest charged by their lending institution, but, no one institution was shut-down due to unclaimed loans, what they said. Learning from this crisis, we recognized to build a regulatory framework which ensures a balance between flexibility to MFIs in their operations and regulations that ensure customer protection and financial health of the MFIs. Hence, the good corporate governance with Self-Regulation Organization (SRO) is highly essential especially in field of microfinance, while they are targeted on vulnerability of poor families in order to promote their livelihoods. This paper discussed about the importance of corporate governance in micro finance sector.