Microfinance Sector Seeks Refinancing Body and IMEF Reforms
Why in the news
The microfinance industry pressed for a dedicated refinancing body and changes to the India Microfinance Equity Fund (IMEF) to ease funding constraints.
Key demands
- Refinance institution: turn MUDRA Bank into a refinancer solely for MFIs. MUDRA now funds banks, SFBs and RRBs, which already get NABARD support.
- Bigger IMEF corpus than the present ₹300 crore.
- Higher per-MFI limit than ₹5 crore.
- More flexibility to use IMEF money as equity, helping draw institutional investors.
Sector snapshot
| Measure | Figure |
|---|---|
| Microfinance assets (Q3FY25) | ₹4.14 trillion |
| Year-on-year change | Up 7.6% |
| Quarter-on-quarter change | Down 4.3% |
| IMEF sanction in FY24 | ₹19 crore to 10 MFIs |
Options and response
- A dedicated refinancer would give cheap funds and cut MFIs’ dependence on commercial banks.
- Alternative: NABARD administers a fresh MFI-focused fund.
- Before Union Budget FY25, talk of a new IMEF-like fund circulated; industry has held discussions with the Finance Ministry and RBI.
Way forward
- A specialised refinancer and IMEF reforms could improve liquidity and stability; the sector awaits decisions from the Finance Ministry and RBI.
Exam angle
- IMEF corpus: ₹300 crore; cap per MFI: ₹5 crore.
- Proposed refinancer: MUDRA Bank (alternative: NABARD fund).