I hope this is helpful, and would love to hear your reactions and suggestions.

Microfinance is under fire these days. The Wall Street Journal, Financial Times and many local outlets have reported on policy measures that have followed alleged abuses committed by microfinance institutions in the state of Andra Pradesh. Reportedly, over-indebted customers, under pressure by MFIs using coertive practices, have commited suicide in the villages of AP. In response, the state government has run down measures that allow banks to lend to MFIs, which is likely to produce a major liquidity crisis in an industry that has relied on this funding to fuel its rapid growth recently. The news come just weeks after the successful public offering of SKS, the largest MFI in AP.

Now let me ring a "soundbite alert". Headlines with "suicide" "microfinance" and "customers" in the same line can go a long way in oversimplifying the effects of microfinance and MFIs on the lives of the poor. They can steer debates in the wrong direction and lead many to conclude that microfinance not only doesn't work but actually destroys the lives of the poor. Conversely, other soundbites like "99% repayment rates", coupled with two or three feel-good stories can also oversimplify the effects and viability of microfinance, making it look like a panacea for the poor.

Whenever I need food for thought on anything microfinance, I turn to David Roodman at the Center for Global Development. His excellent blog on microfinance is full of useful resources to understand what's really going on in Andra Pradesh. In addition to Roodman, CFI's Elisabeth Rhyne chimed in this week with an excellent column in the Huffington Post about the crisis in india. I encourage you to read it if you want to better understand the policies that rule microfinance in India and how they compare to those in countries like Bolivia and Peru, where microfinance has also grown significantly. Rhyne's column is rich in examples and its conclusion resonates with those ofIntellecap paper on this crisis and Aavishkar's Vineet Rai's HBR blog post: state paternalism is not the best way to protect the interest of customers and it ultimately limits the choices available those it's trying to protect. The danger of over-indebtedness and customer abuse is real, but as Rhyne shows, other approaches can be more effective in bringing better governance to MFIs.

Incidentally, a great conference on microfinance and its impacts took place just down the street in New York a few days ago. Tim Ogden, at Philanthropy Action, put together a fantastic roundup of the discussions that took place. I'm not even close to finishing all the readings, but a remark by Esther Duflo stuck with me as I came across it. I'll share it to end this part of the roundup: "... micro-credit "is not like textbooks. It is an opportunity as opposed to an input, and as an opportunity it is embraced in different ways by different people." Well said. Let's all beware of soundbites and oversimplification.

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