Sa-Dhan met with members and experts in Delhi to discuss the Microfinance Bill and the recommendations of the Report of the Malegam Committee. The group consisted of NBFCs, NGOs, Section 25 Microfinance institutions (MFIs) as well as support organisations.
Sa-Dhan Meet Highlights
Sa-Dhan takes a clear stand in highlighting the role of communities and development in Microfinance. In this regard small and medium MFIs irrespective of legal forms are seen to be key players for the future. At present, these agencies serve 33% of poor borrowers, in some of the poorest areas. Sa-Dhan urges the policy makers to pay attention to these challenges. An instrument of utmost importance to work towards ethical practices in Community Microfinance is the Code of Conduct of Sa-Dhan. Sa-Dhan initiated the process of seeking compliance report on the Code from the members as early as September 2010. The analysis in the form of a report will be published soon.
The meeting discussed the need for regulation at national level, which looks at the Microfinance sector as an integrated development tool for “financial inclusion”. MFIs need an enabling environment to provide all financial services to poor people, foremost thrift and also remittances, insurance. In absence of these Microfinance organisations will be too dependent on banks and investors and cannot service the clients based on their needs.
Sa-Dhan members felt that the regulation should be broad enough to cover all legal forms of MFIs, that it should encourage diligent review of borrower’s cash flows and needs and that the focus should be more on development than only on monitoring of the sector.
Currently, Sa-Dhan (www.sa-dhan.net) has 251 members including microfinance service providers – known as Community Development Finance Institutions (CDFI) or Microfinance Institutions (MFI), capacity builders, networks, wholesale lenders and banks across 20 states in India. As of March 2010, 26.7 million clients were being served by Sa-Dhan’s member with a total loan outstanding of INR 183.4 billion.
Having a diverse membership base with all major practitioners, Sa-Dhan has an in depth understanding of all aspects of microfinance from regulatory, operational, financial, social, governance and management, built through its extensive work in this sector in the last decade. Sa-Dhan also has an excellent data collection system and is considered as one of the best sources of primary data in the microfinance sector. Sector analysis by Sa-Dhan has also been viewed as a reliable and valued resource for the microfinance sector with an increasing focus on impact and operational data of MFIs.