MICROCAPITAL BRIEF: International Finance Corporation (IFC), India’s Microfinance Institutions Network (MFIN) Promote Reporting to Credit Information Bureau

The International Finance Corporation (IFC), the private-investment arm of the World Bank Group, and the Microfinance Institutions Network (MFIN), a self-regulatory organization of Indian microfinance institutions, are working together to encourage microfinance institutions to start reporting to the country’s Credit Information Bureau, which is intended to promote responsible lending. While the Reserve Bank of India (RBI) has mandated that all non-banking finance companies and microfinance institutions (MFIs) report to the credit bureaus, it reported that most MFIs have not yet adopted the practice.

IFC recently hosted a credit reporting workshop to raise awareness about the initiative. The workshop, which was supported by US-based investment firm Omidyar Network and global banks HSBC and Citigroup, was attended by banks, MFIs and industry experts.

Alok Prasad, CEO of the Microfinance Institutions Network, said, “In India, the microfinance sector has great potential in terms of the number of clients served. However, with a fast-growing sector, multiple borrowings by clients had become an issue. We have worked with IFC to ensure that more and more microfinance institutions are encouraged to report to credit bureaus and have mandated that our network members report and use credit reports from the Credit Information Bureau.”

The Credit Information Bureau is owned by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited, Trans Union International and a number of banks.

By Kristha Abores, Research Associate

About Microfinance Institutions Network (MFIN): The Microfinance Institutions Network (MFIN) is a trade association of 46 Indian microfinance institutions that operate as non-banking finance companies and together reportedly account for approximately 80 percent of the Indian market. MFIN is supported by the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group.

About International Finance Corporation (IFC): A member of the World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2011, IFC has 182 member countries, reports net income of USD 1.58 billion, total assets of USD 68.5 billion, return on assets of 2.4 percent and total investment mobilization of USD 12.2 billion to 518 projects.

About Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.

Sources and Additional Resources:

[1] IFC Press Release: “IFC Works with India’s Microfinance Institutions Network to Promote Greater Credit Reporting,” http://www.ifc.org/IFCExt/pressroom/IFCPressRoom.nsf/0/E84E259B7BA5791A85257966004DDC38

RBI Notification: “Submission of Credit Information to Credit Information Bureau (CIB)”, http://rbidocs.rbi.org.in/rdocs/notification/PDFs/29663.pdf

MicroCapital.org article, March 15, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions Network (MFIN), High Mark to Launch Credit Bureau in India,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-network-mfin-high-mark-to-launch-credit-bureau-in-india/

MicroCapital.org article, September 26, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions Move to Recover “Pre-Crisis” Loans Worth $1.4b in Andhra Pradesh, India,” https://www.microcapital.org/microcapital-brief-microfinance-institutions

MicroCapital.org article, October 12, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions in India’s Andhra Pradesh State Seek Government, Commercial Bank Assistance in Restructuring Loans,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-in-india%E2%80%99s-andhra-pradesh-state-seek-government-commercial-bank-assistance-in-restructuring-loans/

MicroCapital.org article, July 14, 2011, “MICROCAPITAL BRIEF: Credit Information Bureau India Limited (CIBIL) to Launch Credit Reporting System for Microfinance,” https://www.microcapital.org/microcapital-brief-credit-information-bureau-india-limited-cibil-to-launch-credit-reporting-system-for-microfinance/

MicroCapital Universe Profile: Microfinance Institutions Network (MFIN), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+(MFIN)

MicroCapital Universe Profile: International Finance Corporation, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29

MicroCapital Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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