The past decade has seen specialized and dedicated efforts by NGOs to bridge the gap between demand and supply, in the provision of financial services to the poor. Unwittingly, these interventions, as they grow, seem to be heading firmly into the terrain of banking. Clarifying the needs and norms that should govern the provision of such services is therefore, an important step in enabling organizations to plan their growth systematically. To proceed in this direction requires an enabling environment, constituted on a legal framework, with policy support. This, in turn, mandates, systematic identification of problems, analysis and the drawing out of solutions.

This is especially true for a country like India where the micro-finance sector is still at a nascent stage of its development, despite several years of its existence. Significant momentum towards outreach and sustainability can therefore be built-up only if key legal and regulatory problems are identified and analyzed so as to evolve pragmatic solutions.

Accordingly, this first special issue ofSa-dhan Newsletter deals with this important, yet under explored area of policy issues with regard to micro- finance in India. The primary objective is to highlight the various legal problems in micro-finance and outline possible strategies that can help in developing an enabling policy environment for micro-finance in India. The lead article in this special issue is a summary of the recommendations made by the RBI/NABARD appointed task force for micro- finance. Among other things, the task force report calls for simplifying the regulation of micro-finance institutions based on the volume of savings collected by them and proposes self-regulation apart from off and on site supervision.

The impact of the task force recommendations is very evident from the fact that the RBI on January 13*, 2000, announced that NBFCs involved in micro- finance would be exempt from registration and other requirements, if they satisfy certain conditions. Two such announcements by the RBI - credit policy for 1999-2000 and Micro-finance NBFC Status - have been reproduced in this issue, especially, to enable dissemination of these policy changes to practitioners and other stakeholders involved in micro-finance.

The second major article in this issue (by AL Femandez) highlights the fact that mere policy changes cannot propel MFIs to reach the goal of sustainability and outreach. It cautions the sector that burgeoning growth without sustained capacity building could well result in micro-credit turning out into a macro mess.

Finally, this issue contains other useful policy information including the efforts (like that ofCDF, Hyderabad) towards implementing and /or enacting parallel and progressive cooperative legislation in various states such as Jammu and Kashmir, Bihar and Madhya Pradesh.

Sa-dhan hopes that the shared information and viewpoints will set offfurther debate on various key policy issues relevant to the sector and create greater awareness amongst micro-finance practitioners on legal and regulatory aspects. Please feel free to send us your comments and views, which, we will try to address as well as publish in subsequent issues of the Sa-Dhan newsletter.