At a meeting in Mumbai early this month, a group of thirty Indian microfinance institutions (MFIs) agreed to back a private credit bureau and a voluntary credit code.
Pursuant to the code, MFIs agreed not to offer above INR 50,000 (USD 1,000) 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 140,550 (USD 3,000). The voluntary credit code will be enforced by Microfinance India Network (MFIN), a trade association of microfinance lenders. In a parallel development, a group of Indian MFIs jointly took a 5% equity stake in High Mark Credit Information Services Pvt. Ltd., which will provide microlenders with independent credit information about microborrowers in order to avoid over-indebtedness. Currently, microborrowers can take loans from multiple microlenders because their credit histories are not tracked. While current default rates among microborrowers remain low, there is concern among microlenders that over-indebtedness may lead to future loan losses. Vijay Mahajan, Chairman of the Microfinance India Network, states, “Proper enforcement of the code of conduct would lead to greater financial inclusion. The aim is to stop multiple lending, which leads to delinquency.”
Similar Posts:
- MICROCAPITAL BRIEF: Global Partnerships, Goodwell, Oikocredit Invest $8.5m in Equity in Good Nature Agro to Boost Profits of Small Farms in Southern Africa
- MICROCAPITAL BRIEF: Incofin Closes India Progress Fund with $77m to Promote Financial Inclusion, Agricultural Value Chains
- MICROFINANCE EVENT: Global SME Finance Forum; September 12-14, 2023; Mumbai, India
- SPECIAL REPORT: Investors, MFIs Continue to Wrestle with Sustainable Finance Disclosures Regulation (SFDR) #EMW2023
- MICROFINANCE EVENT: Global Development Conference on Biodiversity and Sustainable Development; October 31 – November 1, 2023; Quito, Ecuador
