Bring not-for-profit microlenders under regulatory framework: MFI body

An association of microfinance institutions (MFIs) on Wednesday said lenders who are operating as not-for-profit organisations should be brought under the regulatory framework for development of the industry.

Currently, NBFC-MFIs are regulated by the Reserve Bank of India but not-for-profit organisations and SHG-promoting- institutions (SHPIs), which are providing micro loans, should also be part of the regulatory framework of the financial sector, Sa-Dhan executive director P Satish said.

"RBI can continue as an umbrella regulator but under that there can be an overseeing regulator to cover all the MFIs operating in the country along with NBFC-MFIs," he said.

Out of its 250 odd members, only about 100 come under the purview of RBI, he said while speaking at the 5th Eastern India Microfinance Summit 2019.

Sa-Dhan is an MFI association and also a self- regulatory body.

Though there are 2-3 institutions that can be entrusted with the regulatory job but the National Bank for Agriculture and Rural Development (Nabard) seems to be more "appropriately placed" with their vast presence and engagement in rural development activities, he said.

Bringing all MFIs including the not-for-profit ones into the regulatory framework was under the government's consideration for last several years after the Andhra Pradesh MFI crisis, Satish said.

"Bills were drafted but later nothing had happened. I think it is high time to think about this," he said.

MFIN chief executive officer Harsh Shrivastava said the industry needs to create more awareness among political leaders and the government agencies to allay any apprehensions about its legitimacy.

MFIN is another self-regulatory organisation for NBFC-MFI players.

According to an internal study of Bandhan Bank, the aggregate loan portfolio of MFIs can grow manifold in the next five years.

At present, MFI industry's aggregate loan portfolio is over Rs 2 lakh crore but can increase up to Rs 14-15 lakh crore in this period, assuming the population growth of about one per cent and loan ticket size expanding between 10 and 15 per cent every year.

Ajit Kr Maity, chairman of Association of Microfinance Institutions in West Bengal, said MFIs are organising training and skill development programmes for the rural people to create awareness about micro lending but more are needed to be done for inclusive growth.