MFIN to make accreditation with credit bureaus compulsory for MFI’s - India Microfinance Business News
This is a welcome move. It is right time that Micro Finance Institutions (MFIs) are being closely monitored. Having adopted the set up of Non Banking Finance Companies (NBFCs), it is imperative that they should comply with all guidelines applicable to the regulators (RBI and SEBI) as also the Self Regulatory Organisations (SROs) depending upon the activities they take up. Over a decade back, there was large scale mushrooming of NBFCs when the banking industry itself was undergoing large scale reforms.
Unfortunately, NBFCs made merry in the rates of interest charge and to a large extent were responsible for disturbing the financial and credit discipline in India. It was Vasudev Committee in 1998-99, which recommended strict guidelines after the CRB Scam surfaced several types of irregularities in the sector particularly in lease financing, hire purchase, bill discounting as also unhealthy competition in deposits segment. While NBFCs were seasoned and streamlined by both the regulators in a phased manner, it is the turn of MFIs now.
Indian Financial System has experienced new developments with legal, accounting and technological changes; Asset Liability and Risk Management methods, Know Your Customer guidelines, and so on. MFIs also be careful in not mushrooming and spoil the show because in most of the cases, they undertake a noble cause of helping the illiterate, innocent and gullible rural poor - mostly women. The Grameen experience in Bangladesh and elsewhere, SEWA in India and Village Banking in Africa are to be taken as role models in this developmental pursuit. Eventually, the Millennium Development Goals of the UN spreaheaded by the then Secretary General - Mr Kofi Annan have to be realised for the common good of the humanity and improving the quality of life.