MFIs network for self-regulation

As many as 31 microfinance institutions (MFIs), including the top 10 in the country, have come together to set up Microfinance Institutions Network (MFIN), a self-regulatory organisation that aims to work with regulators to promote microfinance to achieve larger financial inclusion goals.

“MFIN is the response of NBFC (non banking financial company) MFIs in the country to concerns of overborrowing by clients and unregulated credit practices in the microfinance sector. This level of unity and commitment to client protection is unique and has not been seen in any other sector in India. MFIN members now collectively represent almost 80 per cent of the entire microfinance sector in the country. We are confident that a co-ordinated and united approach from the members of MFIN would enable us to support the government’s initiative of taking forward on a significant manner the process of financial inclusion to the masses in a transparent and sustainable basis,” MFIN president and Basix chairman, Vijay Mahajan, stated in a press release.

MFIN members have invested in Alpha Micro Finance Consultants P Ltd (Alpha), which in turn has invested Rs 2 crore in setting up a credit bureau (CB). With the members of MFIN contributing data to the CB, it is expected to help improve credit risk management within the sector and check multiple borrowing and overindebtedness.

Code of conduct
MFIN has also adopted a code of conduct, which focuses on fair practices with borrowers including promoting transparency, fixing overall lending limits at client level, data sharing, recruitment practices, whistle blowing and enforcement mechanisms.

Members are stated to have committed to communicate interest rates on reducing balance method and other charges while following fair recovery mechanisms. A whistle blower policy allows violation of code by any member to be reported to the Enforcement Committee (EC), which will investigate and take action against the erring MFI.

Ombudsman
An Ombudsman is also being appointed for any appeal against the EC decisions and the final action in case of continued violation of the code will be cessation of membership of MFIN for such erring member

Alpha would seek to be appointed as one of the Registrars by the Unique Identification Authority of India (UIDAI) and the members would help complete 100 million registrations under the Government of India programme through identification of its clients and their family members.

MFIN is supported by Omidyar Network, a philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group. Omidyar Network is funding the project to support MFIN in its above efforts. IFC is providing advisory services and technical consultancy to Alpha in its effort to get the credit bureau services being made available to the MFI sector.

The board of MFIN consists of Vijay Mahajan (chairman, Basix) as chairman, along with Suresh Gurumani (CEO, SKS Microfinance), Chandrasekar Ghosh (CEO, Bandhan), Rekam Jayasurya (CEO, Asmitha), Shubhankar Sen Gupta (CEO, Arohan), Ajay Verma (MD & CEO Sahayata Microfinance), HP Singh (CMD, Satin Creditcare Network), Samit Ghosh (CEO, Ujjivan) and PN Vasudevan (MD, Equitas Microfinance) as directors.