| Company | Value | Change | %Change |
|---|
During the meeting, MFIs told the government that they are “facing difficulties in raising low-cost, long-term funds, and the quality of their portfolio is being affected by the various issues, including a reduction in lending to the sector”.
MFI lenders have sought government intervention through a credit guarantee scheme and a dedicated funding mechanism.
Speaking to CNBC-TV18 after the meeting, Jiji Mammen, ED & CEO of Sa-Dhan, said, “Request is for funding as that is a major challenge for the microfinance sector. Getting cost-free funding is very important as it will bring down the ultimate pricing. Can the government create dedicated funding for MFIs? We have requested a credit guarantee mechanism as well, so that MFIs can borrow from banks and DFIs.”
The government had introduced a credit guarantee scheme for MFIs during the COVID-19 period, and the industry now wants the scheme revived as a regular feature.
The microfinance lenders have also sought a “relaxation in qualifying assets norms applicable to MFIs so that their risk can be diversified to other lending avenues.”.
Sa-Dhan management explained this request: “Qualifying assets (MFI Loans) were 85% of net assets; this was changed to 75% of total assets by RBI in 2022. That 10% increase has not benefited the MFIs. We have requested [a review] of this.”
Meanwhile, the DFS Secretary emphasised the need for MFIs to strengthen the sector. “MFIs need to draw a roadmap to strengthen the sector, be financially sound, and become more viable,” he said.
The government has also advised MFIs to encourage the digital repayment of loans while focusing on cybersecurity and building a resilient IT infrastructure. Additionally, MFIs were urged to strengthen their governance standards.
The MFI industry has grown significantly, expanding its business from ₹17,264 crore in March 2012 to ₹3.93 lakh crore as of November 2024.
