On 15 October 2010, the Government of the state of Andhra Pradesh (GoAP) in India promulgated an Ordinancei attempting to regulate the microfinance industry in the state. Intellecap, the India-based social business advisory firm, released a White Paperii which sought to provide an overview of events leading up to the promulgation of the Ordinance, an assessment of the implications of its provisions, and an impartial evaluation of its impact on the industry.

Industry reactions to the Ordinance were initially uniformly negative. However, events in the last three weeks have significantly changed stakeholder perceptions. Anecdotal evidence from the field appears to be moderating extreme positions in both government and industry. The Government appears to have toned down some of its rhetoric, and the industry has begun to acknowledge that the Ordinance provides the basis for some desirable cleaning-up. It is possible that the current crisis could become a turning point, leading to a more balanced, better-governed and better-understood microfinance industry. This Update to Intellecap‟s White Paper offers a view on the changing perceptions of industry stakeholders.

Clean-up After the Storm
The abruptness of the GoAP‟s action in promulgating the Ordinance, with no consultation, took most industry stakeholders by surprise. The passage of the Ordinance significantly influenced the perceptions of global investors (and global media) of risks in India, and in private sector involvement in services to the poor – not good for India, or for poverty reduction. Indian media reacted initially with characteristic sensationalism, but that has now given way to relatively balanced and, more importantly, productive action on the ground.