Budget impact: MFI lending expected to pick up

Micro-finance lending by MFIs and banks is set to pick up in the coming months following the announcement of a Rs 100 crore fund for the sector in the Union Budget, a top Micro-Finance Institutions Network (MFIN) official said today.

Haryana-based MFIN, a self-regulatory organisation for the micro-finance industry, has 46 Reserve Bank-registered micro-finance institutions as its clients.

"Though fresh lending (by banks) has come down, the Budget speech of Finance Minister looks positive. My belief is that it (lending) will pick up and move forward in the right direction (in future),"  MFIN Chief Executive Officer Alok Prasad told reporters here.

Prasad and senior officials were here to announce the launch of a "Credit Bureau" for MFI clients that would help analyse the credit-worthiness of a borrower.

He said the Credit Bureau has so far uploaded 28 million loan accounts. Data for all 46 MFI members is slated to be uploaded over the next two months, he said.

The Bureau, he said, would offer many benefits like readily available client data that would allow MFIs to determine the repayment behaviour of borrowers.

Establishment of the proposed equity fund for MFIs is expected to help the cash-strapped sector continue lending to small borrowers.

The MFI sector was faced with a liquidity crunch after banks refused to lend to them following a string of farmer suicides in Andhra Pradesh and the introduction of an ordinance in the state, now passed into an Act, to regulate MFIs' operations.