A group of lenders headed by the Small Industries Development Bank of India (SIDBI), a state-owned bank, have made it compulsory for microfinance institutions (MFIs) in the country to undergo third-party assessments of their codes of conduct in order to receive loans. The State Bank of India, ICICI Bank, HDFC Bank and HSBC have been identified as members of the group of lenders. Combined, these four banks account for an estimated 80 percent of loans administered to MFIs. The assessment of codes of conduct is in addition to the credit ratings already required for wholesale borrowing. Model codes of conduct cover such areas as multiple lending and policies on loan recovery practices.
The 191 Indian microfinance institutions reporting 2011 data to the US-based Microfinance Information Exchange report an aggregate gross loan portfolio of USD 4.3 billion and deposits collected totaling USD 106 million.
By Lena Phillips, Research Associate
About Small Industries Development Bank of India (SIDBI)
Established by the Indian Parliament in 1990, SIDBI offers products and services in areas including direct finance, international finance, government subsidy and fixed deposits. Its clients include financial institutions, investors and entrepreneurs. SIDBI participates in the Indian microfinance sector by providing credit and capacity building grants to large- and medium-scale microfinance institutions. As of March 2012, SIDBI reported total assets of INR 594 billion (USD 10.9 billion).
Sources and Additional Resources:
The Economic Times: “Get code of conduct rated by a third-party in parallel to credit ratings to avail loans: Sidbi to MFIs”,by Atmadip Ray, http://articles.economictimes.indiatimes.com/2012-11-03/news/34892078_1_mfis-microfinance-institutions-network-sidbi
MicroCapital.org article, 16 November 2012: “SPECIAL REPORT: Responsible Microfinance Implementation Action Group Looks to Boost Usage of Existing Tools, Distributes Template of Covenants for Investors to Attach to Loans to Microbanks”, http://www.microcapital.org/special-report-responsible-microfinance-implementation-action-group-looks-to-boost-usage-of-existing-tools-distributes-template-of-covenants-for-investors-to-attach-to-loans-to-microbanks/#more-21095
MicroCapital.org article, 4 April 2012: “MICROCAPITAL BRIEF: Indian Microfinance Sector Cautious on Branch Expansion, Hiring”, http://www.microcapital.org/microcapital-brief-indian-microfinance-sector-cautious-on-branch-expansion-hiring/#more-18157
MicroCapital.org article, 2 April 2012: “MICROCAPITAL BRIEF: Small Industries Development Bank of India (SIDBI) to Commit $5.8m in Equity, Loans to Small Microfinance Institutions”, http://www.microcapital.org/microcapital-brief-small-industries-development-bank-of-india-sidbi-to-commit-5-8m-in-equity-loans-to-small-microfinance-institutions/#more-18090
MicroCapital.org article, 27 March 2012: “MICROCAPITAL BRIEF: 9.2m Microfinance Borrowers in India Have Defaulted Since 2010”, http://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowers-in-india-have-defaulted-since-2010/#more-17990
MicroCapital.org Article, December 20, 2011, “International Finance Corporation (IFC), India’s Microfinance Institutions Network (MFIN) Promote Reporting to Credit Information Bureau”, http://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-indias-microfinance-institutions-network-mfin-promote-reporting-to-credit-information-bureau/
MicroCapital.org article, February 22, 2011, “MICROCAPITAL BRIEF: ACCION International’s Smart Campaign to Launch Certification Program for Client Protection in Microfinance,” http://www.microcapital.org/microcapital-brief-accion-international%E2%80%99s-smart-campaign-to-launch-certification-program-for-client-protection-in-microfinance/
MicroCapital Universe Profile: Small Industries Development Bank of India (SIDBI), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Small+Industries+Development+Bank+of+India+%28SIDBI%29
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