5 issues in microfinance sector that need Narendra Modi's attention

Vijay Mahajan, social entrepreneur, Founder and Chairman of BASIX Group lists five issues for new Narendra Modi government that need to be addressed for financial inclusion and for microfinance sector.

1. Harmonise Aadhaar and National Population Register (NPR): This is needed and brought to its logical conclusion with all citizens getting biometric identification at the earliest. This is important for financial services because transactions will become difficult without this, though efforts must also be made to clarify and ensure that the Aadhaar card is not seen as citizenship card or as an entitlement.

2. The credit bureau system should be made universal:  Every person, irrespective of from where he or she is borrowing -- NBFC (Non-Banking Finance Company), bank or a Self Help Group -- they should all be brought under the credit bureau system. Plus, they should also be linked to utilities like telephone wherever regular payments are involved so that the credit history of the borrower can be made available to the next lender. (There are four credit bureaus in the country today and collect and maintain loan repayment records of borrowers and make them available to lenders).

3. Impose a national ban on loan waivers by political leaders: Under certain circumstances like drought or floods, there may be justification for a loan waiver but it should not be a political leader to decide that. Political leaders can make a demand and it should be an independent financial commission comprising financial, judicial and public policy experts that can decide who gets the loan waiver and how much. This is important because every time there is a loan waiver, the poor suffer in the long run because for the next five years, banks may not be willing to lend in that area and there is enough data to show this.

4. Link telecom network and the financial network: This is necessary to ensure that mobile phones can truly become banking devices in people's pockets. Recognising the fact that we have 700 to 800 million mobile phone users and mobile connectivity is all pervasive. Along with these, there should be safeguards such as limits to which mobile transfers can be permitted and encouraged.

5. Time for universal and compulsory health and pension policy: Given that we are a young nation, the premiums on average will be lower. With a median age of 26 years, universal and compulsory health and pension policy becomes important. Around 600 million young along with another 200 to 300 million below 50 years will get enough time to accumulate pension and be saved from problems of old age poverty later.

As told to E. Kumar Sharma