Check borrowers' profile before lending money: Guv tells MFIs

The microfinance institutions (MFIs) should not carry people on the "dream path" of consumerism and must undertake due diligence of prospective borrowers before lending money to them, Telangana and Andhra Pradesh Governor E S L Narasimhan said today.
MFIs should find out adequacy of skills, competence, capability and the need of borrower before lending money, thereby learning lessons from the crisis that originated in erstwhile Andhra Pradesh in 2010, he said here.
"Today when you are talking of skill development and Make in India as priority areas, I think there is a great responsibility on MFIs - please do not carry people on the dream path of consumerism once again to start with," he said.

Narasimhan was speaking at a national summit on microfinance organised by top industry body Assocham.
Talking about financial inclusion, he said there is an urgent need to bridge the growing gap between haves and have- nots together with the divide between rural-urban, rich-poor, privileged-under privileged.
"Unless we are able to bridge this concept of financial inclusion, (programmes like) Skill India, Make in India are not going to take us anywhere, we need to make a very conscious effort to bridge this gap."

"I think it is for all of us to learn lessons from the past and ensure that we do not repeat the whole crisis of 2010 and force us to do something more again," Narasimhan said.

The Governor was referring to the crisis that broke out in erstwhile Andhra Pradesh when the Government had to bring a law to regulate the MFIs who were accused of adopting coercive methods to recover their dues from borrowers.
He urged the MFIs to expand their operations in rural India with the help of technological advancements.
Sunil Kanoria, Assocham President, said the success of the MFI sector will largely depend on how well the players can blend technology and human interface in providing financial solutions to the clients and leveraging technology to bring down operational costs.