16 Oct 2013
Edition: Page 6
Survarna Saha, a domestic help, is hardly known beyond her
neighbourhood in one of the nondescript localities of Kolkata.
Till recently, her sole documented identity was locked in a carefully
preserved elector’s photo identity card.
Today, Saha's details are a click away.
No, it’s not Aaadhar, the muchtrumpeted Unique Identity Card scheme
that has exposed her identity beyond her immediate neighbourhood, but
a loan from a micro finance institution (MFI).
With the credit bureau for microfinance institutions now fully
functional, details of millions of such small borrowers across India
are now being documented.
This documentation may become one of the largest databases in the
years to come.
In 18 months' time, credit bureaus have been able to gather
information on about 100 million loan accounts of 25 million
individual customers from 42 MFIs, Micro Finance Institutions Network
(MFIN) data shows.
All these loan accounts make a gross loan portfolio of Rs 21,300
crore as of June 2013, a growth of 17 per cent over 2012-13.
Notably, West Bengal has the largest branch network of MFIs,
accounting for over 16 per cent of the all-India branch network.
At present, two credit bureaus — Equifax Credit Information Services
and High Mark Credit Information Services — collate data from MFIs.
The data is being used to assess over-indebtedness and instances of
multiple lending among borrowers.
According to Reserve Bank of India (RBI) norms, not more than two
MFIs or non-banking finance companies should lend to the same borrower
with an individual cap of Rs 50,000.
Thus, between 10 and 30 per cent of the applications get rejected on
grounds of default history, over-indebtedness or multiple-lending,
says Samit Ghosh, founder and CEO of Ujjivan Financial Services.
A microfinance credit bureau helps distinguish between good (lowrisk)
and bad (high-risk) borrowers by looking at their professions, skills,
loan, and repayment histories, just like any other credit bureau.
However, there are a number of challenges in collating data from
While several MFIs submit data to the credit bureaus on a weekly
basis, only a few provide data on a monthly basis, which limits the
scope of the database, according to Ghosh.
Again, lack of uniformity in data structure poses a challenge in the process.
Yet, the biggest challenge in having a coherent database of small
borrowers comes from non-government organisations, credit co-operative
societies and self-help groups (SHGs), which do not furnish data to
the credit bureaus.
“MFIs would capture only a part of the rural finance data.
The SHGs have three times bigger reach than MFIs.
That data is completely missing and there is a big gap,” says Ghosh.
The MFIN has also written to RBI, calling for the need to include
entities other than MFIs to participate in the credit bureaus.
The average loan outstanding per client stood at Rs 8,615 on June 30,
2013, a nine per cent increase over the corresponding year-ago period.
On an average, an MFI branch currently serves 2,671 clients.
The figure was 2,354 in 2012-13.
West Bengal, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra
account for 58 per cent of the MFI branch network in India.