Sa-Dhan seeks additional Rs 7,500 cr towards credit guarantee scheme for MFIs

Sa-Dhan, a self-regulatory organization for microfinance institutions (MFIs), has written to Finance Minister Nirmala Sitharaman seeking allocation of additional Rs 7,500 crore for the credit guarantee scheme for micro lenders.

'We would like to take this opportunity to request you to approve an additional amount of similar extent viz. Rs 7,500 crore for the credit guarantee scheme for MFIs. The additional amount will support the funds flow for MFIs with lower grading, which are smaller and cater to poorer sections and remote areas,' the letter noted.

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Sa-Dhan has issued a press release basis the letter written to the Finance Minister.

The letter said banks are accounting for this (MFI) portfolio under NBFC category and once the exposure limit under NBFCs is reached, banks are unable to approve more funding for micro financiers.

'We sincerely request that banks could be instructed to book this portfolio under separate head of MFIs with suitable exposure norms,' the letter read.

Sa-Dhan said Ministry of Finance has been keen that the credit guarantee scheme is widely used by all MFIs across the country and not limited to a select few.
In its letter to Sitharaman, Sa-Dhan has noted that data aggregated from MFIs and communicated to Department of Financial Services in the finance ministry indicates that MFIs have applied for Rs 18,500 crore from 44 banks.

'We have been coordinating with Ministry of Finance on disbursement of funds and beneficiaries. Ministry of Finance has been eager to track the Credit Guarantee scheme and understand the overall impact,' Sa-Dhan Executive Director P Satish said in the release.

Sa-Dhan has 229 members reaching out to 33 states/UTs and 593 districts. It includes SHG promoting institutions, MFIs (for profit and not for profit), banks, rating agencies, capacity building institutions.