Micro Finance Institutions (MFIs) need to be more robust, vibrant and financially sound, catering to the needs of rural masses. MFIs need to draw a roadmap to strengthen the sector and become more viable, said M Nagaraju, Secretary, DFS, Ministry of Finance.
Chairing a meeting with major MFIs in New Delhi, which was also attended by senior officials of DFS including industry bodies namely MFIN and Sa-Dhan, Nagaraju recognised the work done by MFIs in impacting the lives of people in rural areas. He stated that DFS values the efforts put in by MFIs in supporting financial inclusion.
The engagement with MFIs was designed to foster an open exchange of ideas aimed at elevating the MFI sector. The emphasis was on reaching the low-income households in villages and uplifting their lives by providing them hassle-free financial assistance, if needed.
Participating MFIs apprised the industry operates in over 723 districts including 111 aspirational districts across 28 states and 8 Union Territories. They also cater to the financial needs of almost 80 million borrowers. MFIs contribute 2.03% of the gross value added to GDP and supports 13 million jobs.
During the meeting, challenges and issues being faced by MFIs were also discussed. It was informed that MFIs are facing difficulties in raising low-cost long term funds. The quality of MFI portfolio is being impacted on account of various issues including reduction in lending to the sector.
The MFIs requested for formulating credit guarantee scheme(s) suiting MFIs/borrowers, creation of special fund/facility for MFIs operating in North East region and relaxation in qualifying assets norms applicable to MFIs so that their risk can be diversified to other lending avenues.
It was also pointed out that like digital disbursements, MFIs should encourage repayment of loans digitally while at the same time focus on cybersecurity and resilient IT infrastructure. They should also strengthen their governance standards.
