Code of Conduct Assessment for the Microfinance Sector

This paper provides a macro and micro view of MFIs compliance with the code of conduct (CoC) and fair practices code in India. It shares insights gathered from the sector, streamlines the future format of CoC assessment reports, and reveals the overall lessons that could be learned from these individual assessments. The paper consolidates the findings of CoC assessment reports for 50 MFIs in India that represent diverse legal structures and a range of business sizes and scales of operation. These reports were analyzed using a framework built on five key pillars that are critical to the implementation of the CoC: integrating social value into operations, credit processes and policies, human capital, transparency and fairness, and regulatory compliance. Key recommendations for improving compliance to CoC include:

• SIDBI should offer guidelines and set conditions that must be met by MFIs in order to improve corporate governance practices;
• MFIs must increase their offerings in terms of financial products and services;
• SIDBI should initiate discussions in the sector on the feasibility of prescribing income criteria for assessing the eligibility of microfinance clients;
• SIDBI should, as part of its loan conditions, make it a requirement for each one of its client MFIs to obtain membership of a credit bureau and provide client data to the bureau.