For the first time in India, a credit bureau is offering scores to help understand the credit profile of microfinance customers.
Launched by Equifax Credit Information Services, a credit information company, the product is called Equifax MFI Risk Score.
Through this product, a microfinance institution that is a member of ECIS, can obtain credit reports of its customers.
By scoring their customers, MFIs will be able to understand the credit profile of borrowers more holistically, which will help them align their products and services accordingly, Sanjay Patel, Managing Director and CEO, Equifax India told
A credit score is a numerical representation of the customer’s credit profile and also predicts the probability of a customer going delinquent in the next 12 months.
While retail customers of banks and NBFCs have been scored for some time now, the concept of a credit bureau is relatively new for the MFI sector.
The score is the next step in the evolution of credit information services from a credit bureau since it provides predictive power along with credit attributes in a credit report of a customer, Patel said.
ECIS was issued a certificate of registration by the Reserve Bank of India in March 2010 and the dedicated Micro Finance Bureau was launched in May 2011.
Currently, Equifax has about 120 MFIs as members. On an average, every microfinance institution has about 10 lakh customers.
WHO WILL BENEFIT? Both MFIs and their customers will benefit from a credit score. It would provice MFIs a better understanding of their customers’ credit profile as well as a predictive insight into customer behaviour. This will help them target their products and services more efficiently.
As for customers, credit scores will help differentiate themselves based on their credit behaviour. It will enable them have gain broader access to products in this segment and possibly even credit at lower rates.
srivats.kr@thehindu.co.in