Sa-Dhan, a self-regulatory organisation for the microfinance sector, Thursday said it has introduced the credit assessment framework (CAF) for microfinance borrowers.
Over the past one-and-a-half years, Sa-Dhan has worked to introduce a conducive and effective framework that will enable income assessment and risk profiling of borrowers, according to a statement.
The CAF has been developed based on national and international models of poverty assessment like PPI (Progress out of Poverty Index) and Poverty Assessment framework of National Rural Livelihoods Mission, Government of India.
The framework will help to supplement and improve the existing income assessment model of MFIs with verifiable wellbeing indicators, utilise and integrate existing data points of clients available with MFIs and provide a credit worthiness score (CWS), risk profiling for each client.
It will also promote risk-based loan pricing and loan sizing and prevent over-indebtedness of vulnerable and low-income households.
"The credit assessment framework will not only promote client protection but will also help MFIs in determining loan sizes based on risk profiling thereby increasing repayment rates and reducing risk.
"CAF and its components will help MFIs in strengthening their existing credit appraisal system," Sa-Dhan's Executive Director P Satish said.
Once implemented, the framework will aid in creating a conducive lending and repayment environment for the industry.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU