Every day, billions of low-income households all over the world are saving, borrowing and insuring in myriad ways, formal and informal. The “market” for financial services is well and alive and will continue to be so as long as people have a demand for liquidity and risk management.
However, financial services for the poor are predominantly expensive, unreliable and inconvenient. Markets have the potential to solve the problem of financial services access in a high-quality and sustainable manner, given the inherent ability to attract capital and talent, but markets are not good at self-disciplining.
The case for regulation stems from this feature, so that the growth in financial services does not occur at the cost of customer welfare or systemic stability. It is worthwhile to precisely understand where the trade-offs are between market expansion and consumer welfare in financial services.
Above is an excerpt from an article published in The Economic Times today. Read the full article here.