financial Services Secretary M Nagaraju on Wednesday urged small money lending institutions (MFIs) to focus on cyber security and strong IT infrastructure along with encouraging digital payments of loans. A meeting chaired by Nagaraju emphasized that MFIs in the country need to become more strong, vibrant and financially sound to cater to the needs of the rural population.
Focus on cyber security and strong IT infrastructure
He told the industry bodies MFIN (Microfinance Institutions Network) and ‘Sa-Dhan’ including other entities participating in the meeting that there is a need to prepare a blueprint to strengthen the MFI sector and become more viable. According to the Finance Ministry statement, in the meeting, emphasis was laid on encouraging MFIs to repay loans digitally like digital loan disbursement. Along with this, MFIs should focus on cyber security and strong IT infrastructure and they should also strengthen their operating standards.
Demand to make Aadhaar a necessary KYC document
The challenges and issues facing the MFIs were also discussed during the meeting. It was reported that MFIs are facing difficulties in raising low cost long-term funds. The quality of MFI portfolio is being affected due to various issues including reduction in lending. After the meeting, Jiji Mammen, Executive Director and CEO of Sa-Dhan, said that as a Self-Regulatory Organization (SRO), the MFI has taken steps to weed out entities that are not within the scope of regulation and to prevent extortion by such entities. Put forth the matter of taking strict action against him. He also said that the MFI sector has demanded to make ‘Aadhaar’ a mandatory KYC document for loans for the purpose of uniformity. Currently MFIs are not allowed to collect Aadhaar as KYC document. He said that there should also be a separate funding system as this is a big challenge before the sector.
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