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Relationship of the Credit Bureaus with the Microfinance Sector

Relationship of the Credit Bureaus with the Microfinance Sector

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With the rising economic process, a lot of credit bureaus have been established in the country. RBI receives applications for the same quite frequently. The microfinance industry, since caters to the underprivileged, has a lot of clients who are likely to default payments. This has led to the closure of various institutions. There are millions of clients in the market. However, microfinance institutions need assistance with where the credit bureaus come from.

Every year, since there are crores of losses due to defaulting payments, there is additional pressure in the microfinance sector. The microfinance world is generally an underrated aspect of the economy. One does not identify how imperative it is for the development of the economy. The majority of the population in the organization sector relies on microfinance.

As the same says it all, microfinance is a small-scale financing opportunity offered to people having a low source of income or who are unprivileged to avail of financial solutions at decent rates. In this post, we will discuss the role of different credit bureaus in India in the country’s microfinance sector.

  1. Equifax in the Microfinance Sector

Equifax is a big credit bureau that offers its products in the microfinance sector. It provides information and resources in the form of products and services that can lead to their growth. Some of the popular products offered by Equifax are:

  • Equifax Microfinance Credit Information report –

This type of Equifax report has the primary information of a microfinance customer. It includes their identification details, inquiries, credit details, etc. A microfinance institution can use this data to analyze the credit history of an applicant and identify if they are worthy of the loan.

  • Equifax Microfinance Portfolio Review –

This equips MFIs with review portfolios. The reviews are about the warning indicators and a framework that they need to implement in a market.

  • Equifax Microfinance Score –

This is an extremely useful score. It helps in forecasting the probability of a person who defaults on a loan. Since there have been several defaulters until today, this score allows the MFIs to save millions.

  1. TransUnion CIBIL

CIBIL is another credit bureau that offers Company Credit Information Reports, TransUnion Score, Market Insights, Portfolio Reviews, and Bureau Analyzer. This helps to guide the Microfinance Institutions about their risks.

  1. Experian

This is another emerging player in this field. It bids numerous products to the microfinance institutions. For example, collections, customer management, customer targeting, business information services, and analytical solutions.

  1. HighMark

It is the fourth member of the bureau group. Its devoted Microfinance Bureau helps with the specific needs in this section. It provides various products and services that include geo-analytics consulting, PERFORM score, Portfolio management, CRIF High Mark’s Credit report, alerts, etc.

If you compare the four, it is tough to select the winner. This is because the increased competition assures that the MFIs have admission to complete data about their borrowers to decide accordingly about the credit lending in the long run.

Impact So Far

The Indian Microfinance Industry saw 2010 as a turning point in the Indian market. Millions of defaulters had led to thousands of crores of defaults. Seeing the harsh collection practices, people ended up suiciding. Here is where RBI stepped in and created regulations leading to a bright future.

The new regulations RBI constructed were with the introduction of Credit Bureaus that could assist MFIs to assure no such problems in the future. To a great extent, these credit agencies have been able to achieve their goals. Today they have become an integral component of society playing key roles in the economic strengths.

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