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High CoC compliance in PSIG states finds CRIF High Mark & DFID in a microfinance outreach study

A study conducted on Microfinance Outreach in 4 PSIG (Poorest States Inclusive Growth) States of UP, Bihar, MP and Odisha by CRIF High Mark, DFID and SIDBI highlights a high degree of compliance to Code of Conduct (CoC) guidelines as laid out by the MALEGAM committee (RBI microfinance guidelines), barring few hotspot locations such as Indore etc. Mr. Subhrangshu Chattopadhyay – CP, CRIF High Mark presented this study to SIDBI’s Lenders forum at Mumbai on 19th Nov 2014 and subsequently to a larger forum at Inclusive India Finance Summit 2014 in New Delhi.

The report provided an Area Attractiveness Index to SIDBI and its associates so that they can design policy to incentivize responsible microfinance outreach in the real needy parts of these states.

The key highlights of the study are:

  • A high degree of compliance to Code of Conduct (CoC) guidelines as laid out by the MALEGAM committee (RBI microfinance guidelines) was observed across these states, barring few hotspot locations such as Indore etc.
  • Better portfolio quality than the national average(ex AP)
  • Overheating in some urban pockets(district centres etc.)
  • YOY increase in average loan ticket size reflecting increasing confidence amongst lenders

Commenting on the study, Ragini B. Chowdhary of DFID said “DFID through its PSIG project implemented by SIDBI is committed to responsible expansion of financial services in the underserved states of UP,MP, Bihar and Odisha. The expansion of microfinance in these States has been impressive in the last year. While this expansion is a positive development, we have been concerned about reckless growth which could harm both clients and institutions. We commissioned CRIF Highmark to analyse outreach and growth trends in each of these States to assure ourselves of compliance of MFIs to RBI guidelines, portfolio quality and also to help us identify the areas which still remain unserved. The study has helped us shape our next round of capacity building strategy.”

In a statement, Mrs Kalpana Pandey (MD & CEO – CRIF High Mark) said “Our analysis by & large indicates optimal lending practices by MFIs. As the leading credit bureau in microfinance, we continue to see the positive trends even today, which should also boost confidence for lenders to MFIs in these states. In general, we already provide such geo-insight and portfolio reports to many MFIs and lenders to MFIs to help identify key areas for action. We encourage more use of rich bureau data for such strategic decisions especially in order to avoid unhealthy overheating of few locations”.