Challenges of Introducing Individual Lending in India

This paper examines the growing importance, opportunities and challenges of individual lending (IL) amongst MFIs in India. Indian MFIs have more than a decade of experience in group-lending methodologies, but their acquaintance with individual lending is recent. MFIs getting into IL in India face problems like:

• Lack of information about the borrower;
• Difficulties in getting third-party/government employee guarantees;
• Lack of legal documents that establish asset ownership.

MFIs all over the world are increasing size and scope of their operations in order to meet the demands of their graduating clients. However, IL is very different from group-based lending and and the challenges it presents include:

• Customizing loans to client needs;
• Establishing branches that clients can access;
• Hiring credit officers who can evaluate businesses and structure loans accordingly;
• Generating substantial amounts of cash;
• Capturing individual client loan and repayment details.