Credit bureau is an organization licensed by RBI to collect customer information from all banks, MFIs and any other financial company in the business of providing loans. Before making a loan, credit departments at MFIs will use the bureau to check if the applicant has taken multiple loans or has defaulted. Customers with good credit history will be rewarded with higher loan size and lower payments. Customers with negative credit history will not be given new loans till they clear their past dues, or will be given smaller loans.

Ujjivan has already shared the credit history for all its current and past customers with the bureaus. Most prominent MFIs have also done the same. The bureaus are currently in the process of standardizing this data. They have also developed sophisticated technology to identify customers so that their credit history can be pulled from bureau records.

To make this process easier, MFIN (Microfinance Institution Network) has developed a standard data format for all MFIs to follow. A list of standard IDs (voter card, ration card, etc.) has also been developed for each state. It will be important for all MFIs including Ujjivan to make sure that customer ID (name, father and spouse name, standard ID) and address information is collected accurately with full detail so that the customer can be accurately identified in the bureau.

Ujjivan is actively partnering with MFIN and the bureaus – CIBIL (Credit Information Bureau India Ltd.) and Highmark - to ensure an early launch of bureau operations. Ujjivan is now a member of CIBIL and close to finalizing the membership agreement with Highmark.

Highmark expects to launch its microfinance operations in April 2011 while CIBIL will start in July 2011. Both bureaus have created dedicated teams to accelerate their microfinance efforts.

Stay tuned for more in the coming months.