India's first credit information company, Credit Information Bureau (India) Ltd. (CIBIL) today joined hands with 31 leading microfinance institutions (MFIs) to start a Microfinance Credit Information Bureau (MCIB), a move that will help promote responsible lending and enable MFIs to assess the credit worthiness and current exposure levels of loan applicants.

These 31 MFIs are part of the Microfinance Institutions Network (MFIN), a self regulatory organisation of MFI non-banking financial companies (NBFCs) that work with regulators to promote microfinance (See: Microfinance lenders set up self-regulatory body).

The tie up is expected to change the current scenario of lending in the Indian microfinance sector by enabling informed credit decisions through information sharing.

Announcing the deal, Arun Thukral, managing director, CIBIL said, ''the establishment of MCIB is a vital step towards inculcating financial discipline among the borrowers of micro-loans and will increase credit penetration.''

The MFI sector has grown steadily during the past few years despite a slowdown in the global economy. However, issues over multiple lending and overexposure could become a concern.

A recent report by rating agency CRISIL estimates the Indian microfinance sector at around 120 million households which translate into a credit demand of Rs1.2 trillion at an average per household credit demand of Rs10,000.