The Reserve Bank of India has made it mandatory for non-banking financial companies and microfinance institutions to report to credit bureaus but most microfinance institutions in India have yet to adopt the practice, which is essential to the success of the Credit Information Bureau. To raise awareness about this initiative, IFC hosted a credit reporting workshop today which was attended by banks, microfinance institutions and industry experts. The workshop is supported by the Omidyar Network, HSBC, and Citigroup.
“In India, the microfinance sector has great potential in terms of the number of clients served,” said Alok Prasad, CEO of the Microfinance Institutions Network. “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.”
Getting all lending institutions to participate in credit reporting is important to ensure reliable credit assessments before loans are made. More effort is also required to raise awareness among microfinance borrowers about the benefits of maintaining timely payments and building a credit record that can benefit when they apply for future loans.
“IFC’s support to credit-bureau reporting is a part of its responsible-
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—
About Microfinance Institutions Network
Microfinance Institutions Network (MFIN) is the premier industry association for the microfinance sector in India and its member organizations constitute the leading Microfinance institutions in the country. MFIN was created to promote the key objectives of microfinance, which is to help economically underserved communities achieve greater financial independence and build sustainable livelihoods. MFIN seeks to work closely with regulators and other key stakeholders to achieve larger financial inclusions goals through microfinance. Currently MFIN member organizations consist of 46 of the leading NBFC/MFIs whose combined business constitutes over 80% of the Indian microfinance sector. For more information, visit http://www.mfinindia.org