Microfinance Industry Seeks Government's Credit Boost

Microfinance Industry Network seeks credit guarantee from the government to alleviate banks' hesitation in lending. With banks' reluctance causing liquidity issues, MFIN is demanding a scheme to ensure smooth bank funding. Despite challenges, improvements in terms of non-performing assets and collection efficiencies are seen in the sector.

The Microfinance Industry Network (MFIN) has urgently requested credit guarantee backing from the government. This move aims to encourage banks to lend freely to the sector, according to the MFIN chief executive, Alok Misra, during a press meet.

With non-banking financial companies (NBFCs) and microfinance institutions (MFIs) heavily reliant on bank loans for around two-thirds of their resources, existing hesitance from banks is causing severe liquidity issues. Misra explained that once banks resume lending, disbursements by MFIs will recover, reversing a significant decline in the microlending sector's gross portfolio and borrower numbers.

Presenting a solution, MFIN has proposed a credit guarantee scheme worth Rs 15-20,000 crore to the government, similar to the one used during the Covid crisis. Despite recent struggles, improvements are visible as collection efficiencies improve and non-performing asset ratios decrease, hinting at a sector rebound.

(With inputs from agencies.)