Responsible lending code issued for MFI players

MFIN, Sa-Dhan & IFDC release code for micro-credit industry

■

New Delhi, Sept. 16: Three self-regulatory organisations on Monday jointly released a code for responsible lending for the microcredit industry with an aim at bringing more transparency and address customer-centric issues.

The Code for Responsible Lending (CRL) was launched by Microfinance Institutions Network (MFIN) and Sa-Dhan along with FIDC.

The Code, launched at SaDhan's 15th Annual National Conference, aims to lay down uniform principles for customer-conduct in microcredit, and is sector specific and entity agnostic, MFIN said in a statement.

One of the major guidelines in CRL mandates that only three microcredit entities can lend to a client at the same time. This means that if a client has three active loans from any provider, then a fourth entity will not be able to lend to the client.

NBFC-MFIs are additionally required to ensure that not more than 2NBFC-MFIs lend to a customer. Moreover, prior to sanctioning of a loan, a micro-credit provider should ensure that the total indebtedness should not exceed Rs 1 lakh per customer, MFIN said.

In addition to the CRL, a revised industry Code of Conduct (CoC) was also released for microfinance institutions (MFIs) that will act as a binding and compulsory set of principles in relation to lending practices, the release said.

"This is a significant selfregulatory step across all RBI regulated entities and others that aims at safeguarding the interests of low-income customers through enhancing transparency and compliance.

"We are happy to note that over 90 entities have signed up for the CRL as "Responsible Lenders" and are hopeful that soon all microfinance New Delhi, Sept. 16: Microfinance industry is expected to double its lending business to poor and marginal sections of the society in the next years if the growth momentum continues, Nobel Peace Prize winner and founder of Grameen Bank Muhammad Yunus said. With size, there would also be some challenges which the industry should be geared up to handle, he said.

According to Sa-Dhan’s

lenders will come forward to endorse and adhere to it," said Manoj Nambiar, Chairperson, MFIN.

Vijayalakshmi Das, Chair, Sa-Dhan added that the industry code has been strengthened in the areas of risk management, responsible lending and HR practices which include training and client education.

MFIN further said a significant development in the CRL adoption was the signing up of the Finance Industry Bharat Microfinance Report — 2019 released by Yunus here, the microfinance industry clocked a growth of over 40 per cent, with a gross loan portfolio of Rs 1,78,552 crore in gross loan outstanding at the end of March 2019.

Considered the father of microcredit, Yunus said the trend shows that the industry would double itself as the pace of growth and base has increased. Development Council (FIDC), the self-regulatory organization for registered NBFCs. This makes the CRL more inclusive in its coverage, it added.

A wide range of providers such as NBFC-MFIs, banks, small finance banks (SFBs), NBFCs and Non-profit/ Section 8 MFIs, under different regulatory framework, provide micro-credit to over 5 crore customers from lowincome households.