Improving credit information on MSMEs

Information asymmetry restricts banks/ FIs to purvey adequate, timely and cost effective credit to MSME. This sub-component aims at collating credit history data of MSMEs with a view to strengthening credit information building and dissemination. In addition to these, facilitating Credit Rating and creation of credit scoring products is also encouraged under MSMEFDP.

Support extended for:-

Credit Information Bureau of India Limited.

Credit Information Bureau of India Limited (CIBIL) has been instrumental in fulfilling the need of credit granting institutions for comprehensive credit information of MSMEs by collecting, collating and disseminating credit information on reciprocal basis.
The Project has provided capacity building support to CIBIL towards setting up of MSME Commercial Bureau and integrating the consumer (individual) and commercial (entity) bureau.

The aim of this support is to strengthen credit information, credit availability to genuine borrowers, enhance confidence of bankers to extend credit to MSMEs and instill global best practices. The following are major programs:

• Entity Database: There has been significant increase in size of database. CIBIL database has increased to around 7.14 Million till Jul 2011 from 0.9 million during May 2006. Out of this, approximately 85% is MSME database (6.01 Million).
• Training and Capacity Building of Banks and MSMEs: It is important to continuously educate members about the importance of credit bureau services for lending operations. For awareness and information dissemination, CIBIL has organized training programs covering various topics, such as, data formats and submission, accessing and interpreting credit reports etc.
•  Membership increased from 37 (May 2006) to 133 (till Jul 2011). It includes 28 Public Sector Banks (PSB’s), 6 Financial Institutions (FIs), 39 Private / Foreign Banks and 60 others.
  

Credit Scoring

In order to facilitate transfer to knowledge on areas of current importance viz credit scoring, structuring of new product BASEL II norms, etc. SIDBI conducted an International workshop on Credit Scoring during March 3-4, 2006 at New Delhi. The objective of the workshop was to share knowledge, understanding and awareness on new financing models & techniques and scoring tools in MSMEs. In this regard a core group comprising of leading banks in India was constituted. Three meetings of the core group have been held so far.

Deliberations have concluded that implementation sole at bank level would be facing bottlenecks including lack of participation and as a result, the possibility of implementing a Bureau Level Credit Scoring Product through CIBIL or through downscaling pilot in SIDBI is being explored.