Credit Information Bureau India (Cibil) has entered into a partnership with 31 microfinance institutions (MFIs) to start Microfinance Credit Information Bureau (MCIB).

This bureau will enable borrowers to take informed credit decisions through information sharing, Arun Thukral, managing director, Cibil, said.

“The establishment of Microfinance Credit Information Bureau is a vital step towards inculcating financial discipline among the borrowers of micro-loans and will increase credit penetration. It will help promote responsible lending and enable MFIs to assess the credit worthiness and present exposure levels of loan applicants,” Thukral said, according to a release issued by Cibil.

The partnership has come at a time where issues of multiple lending and overexposure are becoming a growing concern. The new credit information bureau is expected to improve credit risk management and help keep over-indebtedness under check.

Speaking at the function, Vijay Mahajan, chairman, Microfinance Institutions Network (MFIN), said, “Microfinance institutions already serve over 25 million customers who have no documented credit history. The task of tracking the credit history of such large numbers is challenging. By supporting this initiative, Cibil will be participating in a nation-building effort that will go a long way in reducing the risks caused by multiple lending and help maintain 99 per cent-plus performing assets record of the sector."

At present, the Indian microfinance sector is estimated at around 120 million households, which translate into a credit demand of Rs 1.2 trillion at an average per household credit demand of Rs 10,000, according to the release.