Going beyond Andhra Pradesh microfinance crisis, adjusting to a new regulatory regime of Reserve Bank of India and winning back the investor confidence.

This was what the Microfinance Institutions attempted to achieve in 2012 and they met with a considerable degree of success.

The year began on an optimistic note with notification of NBFC-MFI category by the apex bank in December 2011 for fund-starved MFIs which were also challenged by lack of regulatory clarity. Obviously, this put the system back on the tracks especially outside Andhra Pradesh in due course and a cautious yet enthusiastic response from the investors and lenders which ran like a thread throughout the year.

Most-preferred route

The most-preferred route adopted by big names such as like SKS Microfinance Ltd was the securitisation route though other sources of funding also came handy for many MFIs. After a series of setbacks, SKS Microfinance raised Rs 230 crore from institutional investors in July which was the largest capital raising exercise for SKS since its IPO.

The industry experts put the size of deals clocked by the MFIs in the year a little over $100 million. This was by no means small for a sector which was a taboo for investors/banks.

“In so many ways, the industry began to emerge from the shadows of AP crisis in 2012,’’ Alok Prasad, Chief Executive Officer, Microfinance Institution Network, a registered body of NBFC-MFIs, told Business Line .

Credit Bureau

In terms of corporate governance, there was a “big leap’ forward in enforcing self-regulation in many areas including eliminating multiple loans and more defined ground rules, he claimed.

The year had also witnessed digitisation of MFIs’ loans and data-sharing in the form of credit bureau. Probably what could be first of its kind in the world over 75 million loan accounts of MFIs are now electronically monitored and used to take a decision on fresh loans. “We are fully-using credit bureau data for giving loans,’’ S. Dilli Raj, Chief Financial Officer, SKS Micro, said. This was one of the notable achievements made by industry, he added.

Hit hard by rapid expansion before October 2010, MFIs have also learnt to tread cautiously by revamping their strategies. There were proposals for mergers such as Hyderabad-based Spandana, Share and Asmita and it remains to be seen how things shape up in the year to come. Diversification of products and focus on distribution were also seen. The most important trend, however, was to move away from dependency on a single geography. SKS Microfinance took a lead by beginning the process to evenly distribute its portfolio in all the states it operates.

OPTIMISM

The single-most expectation for MFIs is the passage of the Microfinance Bill 2012 which was tabled in Parliament. There was little disappointment that this was not passed in the winter session which ended last week.

However, emboldened by a recent statement by Finance Minister P. Chidambaram in support of the Bill, there is optimism that the Bill would be passed in the ensuing budget session paving way for a uniform and single regulatory regime.

It will also be a challenge for the just-recovering industry to sustain the strengths it gained this year and transform itself into a more broad-based and win back the popularity and respect it once commanded.

> naga.gunturi@thehindu.co.in

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