Budget Expectations: Microfinance institutions seek extension of credit guarantee scheme till FY2023

New Delhi: Microfinance institutions (MFIs) have written to Finance Minister Nirmala Sitharaman seeking extension of the credit guarantee scheme for micro-lenders with an amount of Rs 15,000 crore till FY 2022-23.

Of the amount, at least 75 per cent should be earmarked for small and medium-sized MFIs, Sa-Dhan, a self-regulatory organization for the microfinance sector, wrote in its pre-Budget requirements to the finance minister.

The government is scheduled to present the budget for 2022-23 next month.

The industry body said that small MFIs are finding it difficult to raise additional/new investment and hence requested support with subordinated debt having tenure of 5 to 7 years.

It also said that SIDBI and NABARD should be allowed to issue tax-free social bonds for five years exclusively for providing loan/equity to MFIs operating in semi urban or rural areas.

About 30 per cent of these funds can be in the form of equity and the rest in the form of debt.

Further, micro-lenders have requested setting up of Rs 1,000 crore Microfinance Development Fund in NABARD to support non-profit MFIs with grants as well as revolving fund/refinance assistance.

“The microfinance sector disbursed Rs 2,03,262 lakh crore in the last financial year, which is close to 1.5 per cent of India’s GDP. Therefore, if adequately supported in the upcoming Union Budget, this sector will grow. And can play a vital role in reviving and operating consumption, said P Satish, Executive Director, Sa-Dhan.Also read: Google hikes salaries of top executives after refusing to increase salaries of employees

He said that the government has supported the sector through various measures, including a credit guarantee scheme, during the challenging times of the ongoing pandemic.
However, the sector still faces some challenges in terms of high debt cost and access to low-cost long-term funds, said Satish. Read also: Number of subscribers of Atal Pension Yojana increased to 3.68 crores

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