Microfinance Advisory
The draft Microfinance Bill represents a major step forward in the government’s engagement with the microfinance sector. In the first main paragraph of its circular dated 3rd May 2011, the Reserve Bank of India made a clear statement of the decision to regulate the microfinance sector as a separate category. However the circular itself focused on the priority sector status of bank loans to MFIs and did not indicate how the decision on separate regulation was to be implemented in practice. A reading of the draft Microfinance Bill clears this uncertainty to a large extent and creates the expectation that a promotional framework for microfinance as a tool of financial inclusion can now be put in place. It has been observed that most MFIs pursue crisis management rather than risk management. That is, more emphasis is laid on solving the current crisis rather than pursuing day-to-day risk management which in turn, produces only a temporary solution. Whereas, risk management is the key to averting snowballing events. Most MFIs are many steps behind in risk management relative to the scale, scope, nature, and complexity of their activities and the market environment in which they operate Riskpro understands that risk management in Micro finance institutions is not the same as larger Banking and Insurance sectors. Therefore, Riskpro has developed a unique service offering for this segment. The results and value addition from our advisory will be visible over time and on a long term basis.
