Mfin looking at RBI approval for small finance banking licence

The Microfinance Institutions Network (Mfin) hopes the RBI will expedite issuing small finance banking licence in order to improve people’s access to micro credits.

The timely approval will enable basic banking services to reach the people in a much more vigorous and specialised way and increase the reach of microfinance, considered a door step delivery model, Alok Prasad, CEO, Mfin, said.

Currently, less than 15 per cent people have access to micro credits, despite India being the largest market with a low rate of interest, he said.

Prasad, who was in Kochi for the board meeting, told BusinessLine , that small finance banks would enable lending to a larger section in the lower income category and also facilitate the government’s objective of achieving 100 per cent financial inclusion. Several NBFC micro-finance institutions have already applied for the licence, he added. Asked to comment on a recent research report that suggested there was no evidence of microcredit successfully alleviating poverty in four continents, including India, Prasad said the approach and methodology adopted by the researchers is quite arguable.

“There are many other studies, including one by the World Bank, which have concluded that microfinance intervention has largely had positive effect on clients,” he said.

The registered microfinance industry has achieved a growth rate of 36 per cent over the previous year with loan disbursal of ₹30,000 crore up to December 31, 2014, covering more than 30 million customers. Of this, Kerala’s contribution is about ₹1,200 crore with nine lakh customers.

According to Prasad, microfinance in India is the fastest growing market and over 95 per cent of the industry is controlled by NBFC-MFIs. The industry is looking at a 40 per cent growth rate in the current fiscal.

TN, Bengal on top Asked about the microfinance situation in Andhra Pradesh, he said the 2010 crisis in micro credits and the subsequent government ordinance had affected the whole model of business there. Today, Tamil Nadu and West Bengal are leading in loan disbursals overtaking Andhra Pradesh.

As an association, Mfin acts as a self regulatory organisation (SRO) for registered NBFC-MFIs following the approval given by the RBI. “By stabilising and building our role as an SRO, we have charted out a roadmap to evolve into an organisation covering other financial institutions, including small finance banks,” he said.