Survarna Saha, a domestic help, is hardly known beyond her neighbourhood in one of the nondescript localities of Kolkata. Till recently, her sole documented identity was locked in a carefully preserved elector’s photo identity card. Today, Saha's details are a click away. No, it’s not Aaadhar, the much-trumpeted Unique Identity Card scheme that has exposed her identity beyond her immediate neighbourhood, but a loan from a micro finance institution (MFI).
With the credit bureau for microfinance institutions now fully functional, details of millions of such small borrowers across India are now being documented. This documentation may become one of the largest databases in the years to come.
In 18 months' time, credit bureaus have been able to gather information on about 100 million loan accounts of 25 million individual customers from 42 MFIs, Micro Finance Institutions Network (MFIN) data shows. All these loan accounts make a gross loan portfolio of Rs 21,300 crore as of June 2013, a growth of 17 per cent over 2012-13.
Equifax Credit Information Services and High Mark Credit Information Services are the two credit bureaus that collate data from MFIs
So far, details of 100 million loan accounts belonging to 25 million individual customers have been collected
These loan accounts have a gross loan portfolio of Rs 21,300 crore as of June
The data thus collected is used to assess over-indebtedness and instances of multiple lending among borrowers
West Bengal has the largest branch network of MFIs, accounting for 16 per cent of the all-India branch network
The average loan outstanding per client is Rs 8,615 as on June 30
Notably, West Bengal has the largest branch network of MFIs, accounting for over 16 per cent of the all-India branch network.
At present, two credit bureaus — Equifax Credit Information Services and High Mark Credit Information Services — collate data from MFIs. The data is being used to assess over-indebtedness and instances of multiple lending among borrowers.
According to Reserve Bank of India (RBI) norms, not more than two MFIs or non-banking finance companies should lend to the same borrower with an individual cap of Rs 50,000. Thus, between 10 and 30 per cent of the applications get rejected on grounds of default history, over-indebtedness or multiple-lending, says Samit Ghosh, founder and CEO of Ujjivan Financial Services.
A microfinance credit bureau helps distinguish between good (low-risk) and bad (high-risk) borrowers by looking at their professions, skills, loan, and repayment histories, just like any other credit bureau.
However, there are a number of challenges in collating data from small borrowers. While several MFIs submit data to the credit bureaus on a weekly basis, only a few provide data on a monthly basis, which limits the scope of the database, according to Ghosh. Again, lack of uniformity in data structure poses a challenge in the process.
Yet, the biggest challenge in having a coherent database of small borrowers comes from non-government organisations, credit co-operative societies and self-help groups (SHGs), which do not furnish data to the credit bureaus.
“MFIs would capture only a part of the rural finance data. The SHGs have three times bigger reach than MFIs. That data is completely missing and there is a big gap,” says Ghosh. The MFIN has also written to RBI, calling for the need to include entities other than MFIs to participate in the credit bureaus.
The average loan outstanding per client stood at Rs 8,615 on June 30, 2013, a nine per cent increase over the corresponding year-ago period. On an average, an MFI branch currently serves 2,671 clients. The figure was 2,354 in 2012-13.
West Bengal, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra account for 58 per cent of the MFI branch network in India.