India: Microfinance Network to Have Ombudsmen, Credit Bureau

Jul 2010
Hyderabad, India, July, 03 2010 - Microfinance Institutions Network (MFIN), a self-regulatory organisation of microfinance institutions (MFIs) in the country, has decided to institute offices of ombudsmen on the lines of banking ombudsmen to help in grievance redressal and launch a credit bureau later in the year.

The MFIN, with a membership of about 39 MFIs in the country, representing 80 per cent of the business, met here on Friday and elected Mr Alok Prasad as the Chief Executive Officer of MFIN along with other members. Since the launch of MFIN in March 2010, eight more non-bank financial companies (NBFCs) have joined the network taking the total membership to about 39.

Addressing a press conference here on Saturday, Mr Vijay Mahajan, President of MFIN and Chairman of Basix, said that the meeting held here has decided to constitute three consultative committees spanning financiers, sector service providers and the media.

The network, which had earlier charted out a code of conduct outlining fair practices, good governance and responsible lending, had decided to limit the borrowers group loan size to less than Rs 50,000 from not more than three microfinance institutions, sharing data with credit bureaus and a whistleblower policy on code of conduct violations, among other guidelines.

As part of its efforts to share data on defaults, MFIN has invested in Alpha Micro Finance Consultants to set up a credit bureau. The credit bureau, planned for launch later this year, will help improve credit risk management within the sector. The approval from the RBI is pending.

The idea is to provide borrowers' names, addresses and loan details to Credit Information Bureau (India) Ltd, and High Mark Credit Information Services.

Apart from setting up office of ombudsmen, credit bureau, the meeting also decided to create seven task forces aimed at bringing about transparency, enhancing human resources, provide policy support and research and product diversification other critical issues relating to the sector.

Mr Alok Prasad, CEO of MFIN, said that MFI industry employs over two lakh people providing over Rs 24,000 crore credit. The potential is huge. This can be gauged from the sector growth of about nearly 100 per cent.


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