Microfinance Industry is emerging as one of the largest units that can help the government propel and drive its agenda on Financial Inclusion. These institutions help out in reaching the large unbanked population that has very little or no access to financial credit, says Ratna Vishwanathan, CEO, Microfinance Institutions Network (MFIN), in conversation with Rashi Aditi Ghosh of Elets News Network (ENN).
Tell us about Microfinance Institutions Network (MFIN) and its services.
MFIN was established in October 2009 under the Andhra Pradesh Societies Registration Act 2001. As per its bye-laws all financial institutions that are “substantially engaged in the business of microfinance” and are registered as NBFC-MFIs with the Reserve Bank of India, are eligible for membership to MFIN.
Structured as a Self-Regulatory Organisation (SRO) of the Reserve Bank of India (RBI) regulated NBFC-MFIs, MFIN has been supporting an effective framework for responsible lending and client protection for the industry. MFIN’s primary objective is to work towards the robust development of the microfinance sector by promoting: responsible lending, client protection, good governance and a supportive environment.
MFIN comprises of four verticals namely, Self-Regulation, Advocacy and Development, Communications and Marketing and State Initiatives to be able to focus on the priorities of the sector in an optimum manner. While previously policy advocacy was the primary focus and continues to be so, with the evolution of the sector there are various new functions that have become part of the framework.
The Self-Regulatory function was part of RBI’s remit to MFIN to help supervise compliance at a more granular level on behalf of the Regulator. With the sector coming back into its own over the last five years, there was a felt need for greater engagement with external stakeholders and a strong communication strategy was thought to be the way ahead.
With the industry growing steadily ground level issues are often key indicators of sectoral good health. With this in the State Initiative team keeps continuously engaging with industry issues at a field level to ensure smooth functioning.
What is the role of Microfinance Institutions in India’s BFSI sector?
As the Centre is putting a lot of emphasis on financial inclusion policies, the Microfinance Industry is emerging as one of the largest units that can help the government propel and drive the agenda. These institutions help out in reaching the large unbanked population that has very little or no access to financial credit.
MFIN recently launched an Employee Bureau in association with global information solutions company Equifax. How is it going to empower the Micro-Finance Institutions?
The MFIs at the ground level do face a challenge in terms of attrition and information leakage by the field level staff. The employee bureau will enable companies to address the amorphous structure of employees across the microfinance industry. Microfinance sector faces various challenges on employment, training, benefits and compensation. In a bid to resolve these hurdles, MFIN implemented a transparent system to verify and authenticate the employment details of the talent pool.
The Employee Bureau will help in maintaining a database containing details of the staff which would help MFIs improve quality hiring practices with better past employment check. This will help the industry in accessing the requisite non-financial details i.e excluding salary information of the incoming employee. The database is expected to be comprehensive having information across levels of hierarchy of members of MFIs.
Digitisation is bringing major transformations across all the sectors. What role are you portraying in this regard?
MFIs are increasingly taking to the cashless route. The disbursement of the Industry is fast increasing and stands at 55 per cent. MFIN has also been conducting pilots to see the most efficient methods of going the cashless route in collections. Digital literacy efforts are also being increasingly carried out to socialise borrowers with digital processes.
How challenging was 2017 for your segment? What innovations have you planned in 2018?
2017 was more of a consolidation period due to the demonetisation exercise resulting in Industry writing off around 5-10 percent. However, the Industry has shown resilience in coming back on its feet.