Microfinance Focus, December 14, 2011: During the International Finance Corporation's (IFC) South Asia Regional Workshop on Microfinance Credit Reporting, Alok Prasad from Microfinance Institutions Network (MFIN) and Siddharth Das from High Mark credit bureau discussed the current status of microfinance credit reporting in India.

While Siddharth Das, presented the ‘Credit Bureau Adoption and Usage in the Microfinance Industries’, Alok Prasad shared his experience of MFIN from the industry standpoint on this issue.

Siddharth introduced High Mark as a credit bureau not just for the microfinance sector because borrowers of microfinance today should become regular borrowers tomorrow. It is India’s first and the world’s largest microfinance bureau with over 61 million records corresponding to over 32 million MFI borrowers from 68 MFIs .

In the report, ‘Credit Bureau Adoption and Usage in the Microfinance Industries’ by High Mark, there is analysis on the credit bureau report usage by MFIs. On the national level, the top 12 national MFI members account for about 88% of the total data and the top 12 have generated 86% of the inquiries so far. However, the distribution is skewed. Just two MFIs together made 72% of these inquiries and remaining 10 put together 28%. Of this ten, two MFIs haven’t done inquiries at all.

Siddharth concluded saying “Infrastructure help is needed beyond this point to make further substantial progress. The missing piece is SHG for this sector to be bureau enabled to have all that information to be in the system. To make this society bureau effective needs a lot of work that cannot be solved tomorrow. A lot has been done and a lot more can be done.”

Alok Prasad from MFIN provided a perspective from the industry standpoint. He says, “From our standpoint, we’ve done a fair bit. I feel quite proud of the progress we’ve made over 18 months.” He thanked IFC and Omidyar Network for their support.

He gave an overview of MFIN that is the industry body for NBFC-MFIs with 48 members. This constitutes about 90% of the sector. MFIN’s focus is to be the SRO for the industry with a strong development focus. Creating the necessary infrastructure to ensure as the industry grows and moves forward that all the right things happen.

MFIN activities include self-regulation, policy advocacy, and sector-wide development initiatives. Alok shared that they have had a “strong collaborative approach from the early days and was clear about what we need to be doing is to adopt a multi bureau approach.”

There has been engagement with Credit Information Bureau India Ltd. (CIBIL), Equifax, Experian and High Mark to encourage extension of Credit Bureau services to MFIs and development of dedicated solutions for the sector. There needs to be adequate customization for microfinance client data, competitive pricing for MFIs and innovation products and services.

Alok stressed the standardization of processes for efficient sharing of data. Also the standardization of customer data points such as borrower name, key person name and relationship, father’s name, borrower address and borrower age as on date or date of birth. MFIN aims for the standardization of reporting format.

Alok commented, “All members have been told this is the set of measures you have to adopt. A lot of hard work has to go into it. There is no easy answer no easy solution. Everyone has to come together or it just would not work out. The nature of the challenge I would not like to underestimate at all.”

He pointed out the challenges MFIN faced were capacity and technological challenges vis-à-vis participation of smaller MFIs. Also data and report quality, report. The linkage of client data among different bureaus is a concern and the non-availability of SHG data.

The next steps forward for MFIN are ongoing efforts to have all MFIN members start using bureau reports. It is going forward to encourage other mainstream credit bureaus to enter the microfinance space.