Mfi

Fintech company Recordent has launched a shared credit information platform for not-for-profit microfinance institutions (MFIs), aiming to help lenders identify borrowers with multiple loans and curb over-indebtedness. The MFI Credit Registry will allow Section 8 MFIs-non-profit lenders that provide small-ticket loans primarily to low-income households-to share borrower loan and repayment data through a common platform before sanctioning fresh credit, an official said. Unlike larger microfinance companies that have wider access to borrower information, many Section 8 MFIs have limited visibility into customers' existing loans, increasing the risk of multiple borrowings and loan defaults, the company said. Recordent CEO and Co-Founder Winny Patro said Section 8 MFIs, which operate as not-for-profit entities, currently manage an estimated Rs 4,000 crore of assets. The company said the registry has already been used with 10 Section 8 MFIs, and the results have been encouraging. Devel

This trend suggests that lenders are prioritising credit discipline over growth, particularly in a macro environment marked by cautious lending

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The dealing with internal factors would mean entities require more discipline and emphasis on corporate governance and compliance

In 2022, the RBI updated regulations for MFIs, which now apply to all entities in the sector, including banks, small finance banks, and non-banking financial companies (NBFCs)

Industry-wide stress in the microfinance sector has built up due to unchecked credit growth and multiple loan disbursements to the same customers, resulting in overleveraging among borrowers