MFIs to Distribute its Atal Pension Yojna


MFIs to Distribute its Atal Pension Yojna

With A Network That Covers Almost Every State Of India, MFIs May Serve As Attractive Distribution Channel For Government

Some seriously good news may be around the corner for Micro Finance Institutions, aka MFIs. In a range of efforts aimed at increasng the financial inclusion in country Finance ministry has hinted that it may allow MFIs to distribute its various financial schemes launched recently, including its widely publicized Atal Pension Yojana (APY). Ms. Anjuly Chib Duggal, Secretary to Department of Financial Services (DFS), recently said at a microfinance conclave that DFS is looking into the matter.

In current setting MFIs are not allowed to distribute government’s financial products like APY to the public – only banks can do so on behalf of government. However, in past they have been allowed by the government to take part in another pension scheme called Swavalambhan. For that reason MFIs have been requesting the government to let them take part in distribution of its other schemes too, including APY.

Speaking on the topic Ms. Ratna Vishwanathan, Chief Executive Officer of Micro Finance Institutions Network (MFIN) said that MFIs want to be allowed to take part in distribution as aggregators working on behalf of bankers. That is, rather than collecting money they may collect authorizations on behalf of bankers and then hand them over to banks.

APY is a government-initiated pension scheme that was announced by Prime Minister Narendra Modi on 9th of May 2015 in Kolkata. The scheme aims to provide some social security to those who’re not enrolled under any other pension scheme by providing them a monthly pension between Rs. 1,000 and Rs. 5,000 per month. By November 2015 more than 1 million subscribers had been enrolled under the scheme.

MFIs can serve as an attractive distribution channel for the scheme as they cover 30 States and Union Territories of country and have already provided micro-credit to 2.6 crore small businesses. Five largest MFIs in country according to market share are:

Name Client Base Gross Loan Portfolio Share in Microfinance Market
Bandhan Financial Services Ltd. 6.5 million 9,524 crore 22.49%
SKS Microfinance Ltd 3.6 million 4,155 crore 9.81%
Janalakshmi Financial Services Pvt. Ltd. 2.3 million 3,774 crore 8.91%
Shri Kshethra Dharmasthala Rural Development Project (SKDRDP) 3.3 million 3,570 crore 8.43%
Ujjivan Financial Services Pvt. Ltd. 2.2 million 3,274 crore 7.73%

The aggregate loan portfolio of MFIs stands at the value of Rs. 42,331 crores. Four different types of MFIs are working in the country, registered under various regitration acts. They include NGOs, Mutually Aided Co-operative Societies (MACS), Non-Banking Financial Companies (NBFCs) and Other Non-Profit MFIs. Notably, while NGOs and MACS have the largest number of MFIs, NBFCs have the largest share in loan portfolio. Over 80% of loan capital distributed by MFIs has been provided by NBFCs.

Now It’ll be interesting to see how government uses them for distribution of its social security schemes.

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