Waivers and frauds: The politics of regulation and claims-making in Indian microfinance

Abstract

As microfinance has expanded in India, so have efforts to regulate the sector. The competing regulatory authority of the state governments and the central bank have produced unexpected refusals by borrowers to repay loans, claiming waivers. These waivers, however, are often found to be fakes. In the context of financial inclusion, this article examines regulatory authority at the margins of the state. The growth of microfinance has raised concerns over the systemic impact of non-performing assets in the sector. While the expansion of formal finance has required the greater reach of the central bank, this often comes into competition with the political arm of the state. This paper shows how waivers—both real and fake—operate as a form of claims-making by poor borrowers.