The Credit Information Bureau (Cibil), in association with the registered micro-finance institutions (MFIs) and Micro-finance Institutions Network (MFIN), is planning to come out with a comprehensive report on the credit history of borrowers. This comes in the wake of increasing defaulters in the MFI segment and multiple lenders now competing to increase fresh borrowings.
The credit rating agency is working with the industry to get an authentic MFI borrowers list and accordingly provide a credit score. Currently, Cibil has data pertaining to over 45 million-odd borrowers across the country. The authentication is crucial and there is a need to put all the data together for identification process.
?Due to failure in terms of identification, as of now, there can be no score on the existing MFI data and the challenge is that there is no value to it. We are working with the MFIs to increase the credit value through a common ID such as the Aadhar card or voter ID,? Arun Thukral, Cibil MD, said.
The MFI loans are being disbursed based on the ratings given by the credit bureau to check for defaulters and multiple loans. ?The MFIs have been extending credit to borrowers without accurate information on their past borrowing history and indebtedness. The proposed credit score from CIBIL will enable all registered NBFC-MFIs to gauge whether a prospective borrower has repayment capability before extending credit to them. Importantly, it will also prevent multiple lending to the same borrower by different borrowers,? he added.
MFIs have been working out a strategy to have a sound and trustworthy credit bureau for the benefit of the industry and the borrowers. Alok Prasad, CEO, MFIN, told FE that the bureau would help in fresh borrowings and sieve out defaulters which is the primary focus for survival of MFIs. Often MFIs have to extend credit to customers with inadequate information on their history of indebtedness. Working with Cibil and High Mark and enabling all members of MFIN to contribute data to these CBs would allow MFIN members to have a good idea of overall indebtedness of clients and ensure they have repayment capability before extending credit to them.
Meanwhile, Cibil is also looking to introduce ?risk index? for business entities. This is a global procedure pinned with a scale of 1-5 for obtaining bank loans. ?Our risk index will be a quick snapshot for lenders to assess the credit history of business entities. We are working on it,? Thukral said, while declining to draw any time line for launching the product. He, however, clarified that it would be similar to the credit ratings and will be applicable for corporate entities for availing loans.
