CIB to set up separate subsidiary to keep credit info of MFIs borrowers

KATHMANDU, JAN 05 - 

The Credit Bureau of Information Nepal (CIB) is all set to set up a subsidiary to keep credit information of borrowers of micro-finance institutions (MFIs) amid complaints of multiple borrowing by same clients.

CIB is currently keeping credit information of loanees of commercial banks, development banks and finance companies only. The formation of the subsidiary is aimed at sharing the credit history of MFIs’ borrowers too among all banks and financial institutions (BFIs). “We are making preparations for establishing the subsidiary that will keep information about the credit history of MFIs’ borrowers,” said Anil Chandra Adhikari, chief executive officer of CIB. “We aim to establish the company within 2012.”

According to Adhikari, the bureau is currently preparing technical and financial report of the proposed company and the Asian Development Bank has provided Rs 100 million for the installation of the management information system.

Alarmed by soaring loan defaults as a result of multiple borrowing, MFIs have been demanding that a system be placed which would provide them the information about potential borrowers’ credit history.

There are 21 MFIs and 38 non-government organisations allowed to carry out banking activities. They have collectively made collateral-free lending worth Rs 14.28 until recently, according to NRB. They have their presence in around 65 districts of the country. “Multiple borrowing is rife in the eastern and central region,” said an NRB official.

In the absence a mechanism to share credit history of borrowers, NRB recently provisioned that MFIs should inquire about the credit history of their prospective borrowers from their peers for providing loans worth Rs 30,000 and above.

Source: Kantipur