Now, credit information bureau for microfinance

Added: (Thu Mar 18 2010)

Pressbox (Press Release) - As Reported By AndhraBusiness.com, Largest Online news network for business news in Hyderabad, Andhra Pradesh

Credit Information Bureau (India) Limited (CIBIL) has inked a partnership with 31 leading Microfinance Institutions (MFIs) in India to start a Microfinance Credit Information Bureau.

These 31 MFIs are part of the Microfinance Institutions Network (MFIN), a self -regulatory organization of MFIs that aims to work with regulators to promote microfinance to achieve larger financial inclusion goals, a CIBIL statement said here on Thursday.

This revolutionary initiative by the MFIs is set to change the current scenario of lending in the Indian microfinance sector by enabling informed credit decisions through information sharing.

Speaking on the occasion, Mr. Arun Thukral, Managing Director, CIBIL said: “The establishment of Microfinance Credit Information Bureau is a vital step towards inculcating financial discipline among the borrowers of micro-loans and will increase credit penetration. It will help promote responsible lending and enable MFIs to assess the credit worthiness and current exposure levels of loan applicants”.

Currently, the Indian microfinance sector is estimated around 120 million households which translate into a credit demand of Rs 1.2 trillion at an average per household credit demand of Rs 10,000.

Having a huge potential to strengthen India’s economy further, this sector has grown steadily, but issues over multiple lending and overexposure could become a concern. As a welcome step to mitigate this concern, the MFIs now have decided to join hands with CIBIL to set up an exclusive credit information bureau for the sector with the view to improving the credit risk management and to help keep over-indebtedness under check.

“Microfinance Institutions already serve over 25 million customers who have no documented credit history. The task of tracking the credit history of such large numbers is challenging. By supporting this initiative, CIBIL will be participating in a nation-building effort that will go a long way in reducing the risks caused by multiple lending and help maintain the 99% plus performing assets record of the sector," said Mr. Vijay Mahajan, Chairman, MFIN.

CIBIL pioneered credit information sharing in India, and has contributed significantly to helping improve the functionality and stability of the Indian financial system. Today, CIBIL’s database has grown to over 155 million records and a member base that exceeds 200 financial institutions.