Microfinance Institutions Network through Alpha invests Rs 2 Cr to set up credit bureau

Microfinance Focus, March 9, 2010: Microfinance Institutions Network (MFIN), a self-regulatory organization of 31 Indian NBFC – microfinance institutions, has invested in Alpha Micro Finance Consultants P Ltd (Alpha), which in turn will invest Rs. 2 Crore (INR 20 million) in setting up a credit bureau to improve credit risk management within the sector and ensure multiple borrowing and over indebtedness is checked.

Working with CIBIL and High Mark, all members of MFIN will contribute data to the credit bureau allowing MFIN members to ascertain the overall indebtedness of clients and assess their repayment capabilities. MFIN has also defined a code of conduct focusing on fair lending practices with borrowers including promoting transparency, fixing overall lending limits at client level, data sharing, recruitment practices, whistle blowing and enforcement mechanisms.

MFIN members have committed to communicate interest rates on reducing balance method and other charges clearly while following fair recovery mechanisms. The whistle blower policy allows violation of code by any member to be reported to the Enforcement Committee which would investigate and take action against the erring MFI.

An Ombudsman is also being appointed for any appeal against the Enforcement Committee decisions and the final action in case of continued violation of the code would be cessation of membership of MFIN for such erring member, said a statement.

Alpha also plans to seek to be appointed as one of the registrars by the Unique Identification Authority of India (UIDAI) and help with 100 million registrations under the Government of India programme through identification of its clients and their family members.

”MFIN is the response of non-banking MFIs in the country to concerns of over borrowing by clients and unregulated credit practices in microfinance sector,” says MFIN president Vijay Mahajan, who is also chairman of Hyderabad-based Basix. “This level of unity and commitment to client protection is unique and has not been seen in any other sector in India. MFIN members now collectively represent almost 80% of the entire microfinance sector in the country. We are confident that a co-ordinated and united approach from the members of MFIN would enable us to support the Government’s initiative of taking forward on a significant manner the process of financial inclusion to the masses in a transparent and sustainable basis.”

MFIN is supported by Omidyar Network, a philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group. Omidyar Network is funding the project to support MFIN in its above efforts. IFC is providing advisory services and technical consultancy to Alpha in its effort to get the credit bureau services being made available to the MFI sector.

Apart from Mahajan, the board of MFIN consists of Suresh Gurumani, CEO, SKS Microfinance, Chandrasekar Ghosh, CEO, Bandhan, Rekam Jayasurya, CEO, Asmitha, Shubhankar Sen Gupta, CEO, Arohan, Ajay Verma, MD & CEO , Sahayata Microfinance, H P Singh, CMD, Satin Creditcare Network, Samit Ghosh, CEO, Ujjivan, and P NVasudevan, MD, Equitas Microfinance.

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