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Ombudsmen to aid in making MFIs transparent

BS Reporter  |  Chennai/ Hyderabad 

The (MFIN) which has 39 microfinance institutions as members would appoint four regional ombudsmen in three months to oversee good governance in microfinance sector, according to MFIN president and Basix chairman

Speaking to the media here at the weekend, Mahajan said the step was part of the efforts to ensure transparency in activities of MFIN members. The ombudsmen would not be from the MFIs, he said.

MFIN, formed in December last year, held its first annual general body meeting in Hyderabad on Friday last. It appointed Alok Prasad, the former country director of Citi Microfinance Group, as its chief executive officer.

Mahajan said MFI industry was working with a mission to reach out to 100 million households by 2020 from the present 25 million families. The members would diversify their source of funding to reduce the cost of funds and pass on the benefits of scale of operations to the customers. Among others, the members were inclined to offer diversified products in health, education, drinking water and other sectors.

MFIN were stressing on microinsurance to protect the loanees from financial upsets.

The were also looking to increase their fee-based income.

MFIN would launch India’s first microfinance credit bureau this year to provide loan details of borrowers. MFIN had invested in Alpha Micro Finance Consultants, which in turn invested Rs 2 crore to set up credit bureau to help improve credit risk management within the sector. It was also investing another Rs 50 lakh for technology upgrade, said Prasad.

The members were also taking forward the proposal to allow them to be banking correspondents to make the optimum use of their network, he said.

“There is potential to grow six times the present market to meet the basic requirements. The market would deepen when lifestyle products are included in the loan portfolio,’’ said Prasad adding that credit requirements were under met. For instance, even in Andhra Pradesh, considered to be the haven of the micro finance industry, the penetration is only 12.41 per cent — only Rs 3,523 crore could be lent as against the demand for 29,000 crore — he pointed out.

MFIN finalised taskforces for transparency, human resources, policy support and research. It was asking its members to ensure that their field staff did not resort to coercive or abusive methods for recovery of the loan.

As part of its code of conduct, MFIN capped the maximum loan to be given to an individual at Rs 50,000 to arrest multiple lending and poaching by members.

On the impact of the new base rate structure that came into effect from July 1, he said there would not be any immediate impact on the cost of funds. This would aid in transparent pricing of the funds in the long run, he said.

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