A recent article featured on Livemint.com, an Indian business newspaper owned by the Wall Street Journal, discusses the debate surrounding the code of conduct recently adopted by the Microfinance India Network (MFIN), a trade association made up of 38 Indian non-banking finance companies (NBFCs) engaged in microfinance.

Pursuant to the code, the MFIs agreed not to offer more than INR 50,000 (USD 1,096) to any single borrower and that no more than three lenders would lend money to a single individual, thereby capping total indebtedness per individual at INR 150,000 (USD 3,383).

Mr N. Srinivasan, author of Microfinance India: State of the Sector Report 2009, published by SAGE Publications, argued, “The code of conduct is an attempt to bring down the level of anxiety in policy and regulatory establishments. …Larger institutions which have much more at stake have found the need to show they are responsible.”

Critics of the code of conduct, including Mr Nachiket Mor, President of ICICI Foundation, argue that “the cap (on value as well as lenders) will result in denial of access,” and some measures in the code could “stifle competitive forces.”

By Stefanie Rubin, Research Associate

About Microfinance India Network (MFIN):

The Microfinance India Network (MFIN) is a trade association of microfinance lenders. Vijay Mahajan, Chairman of MFIN, is also the Chairman of the BASIX Group, an Indian microfinance institution established in 1996. BASIX Group consists of several companies which provide savings and insurance services to poor households in rural India as well as agricultural/business development services and institutional development services.

Additional Resources:

Source Article: Livemint.com: “MFIN Code Shows Cracks Within Ranks”

MicroCapital Universe: MFIN

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