Microfinance sees 39% rise in loan portfolio
Defying muted credit growth in the banking sector, the microfinance sector registered a growth of around 39 per cent on a year-on-year basis, with the total outstanding loan amount at ~1.48 trillion at the end of June 2018, according to data released by Microfinance Institutions Network (MFIN).
According to the data from the Reserve Bank of India, gross bank credit increased by 11.07 per cent in June on a yearon-year-basis, while microcredit grew by 48.3 per cent.
Over the past few months, most MFIs (microfinance institutions) have been recovering from the after-effects of demonetisation and government-mandated debt waivers.
However, with the majority of non-performing loans written off, MFIs are again looking at growing their portfolios. Several of the MFIs have been exploring the option of initial public offerings (IPOs) to raise funds. Banks hold the largest share of microloans at 39 per cent, followed by non-banking finance companies (NBFC)MFIs accounting for 32 per cent of the total loan outstanding. Small Finance Banks had a share of 21 per cent, while NBFCs at 7 per cent and non-profit accounting for remaining one per cent of the microfinance pie.
About 64 per cent of the bank lending to the MFI sector was direct lending, while the rest was through banking correspondents. The portfolio at risk (loans that have at least one payment for more than 30 days overdue), which were 10.7 per cent in June 2017, stood at 3.2 per cent at the end of June 2018, signifying a significant improvement in the asset quality of microloans.
Cashless disbursements by NBFC-MFIs now account for 87 per cent of the total disbursements. In Q1 FY 2018-19, a total of ~114 billion was disbursed in cashless mode in about 4.2 million loan accounts. According to Harsh Shrivastava, MFIN CEO, “Microfinance industry has gained pace, showcasing growth in the past quarters. We see more new players entering the space and the current ones growing larger realising their IPO plans. Additionally, improved investors’ confidence, due to proper regulations in place and the increased transparency in the sector, will also support the growth story.”
In Q1 of FY19, NBFC-MFIs received a total debt funding of about ~102 billion, which is a whopping 160 per cent growth over Q1 of FY 18. The total equity in the NBFC-MFI sector was about ~103 billion, of which about 48 per cent belonged to the category of foreign equity. In terms of regional distribution of portfolio (GLP), east and north east accounts for 35 per cent of the total NBFC-MFI portfolio, south 26 per cent, north 15 per cent, west 14 per cent and central region contributes 10 per cent.
Karnataka, Odisha, Bihar, Uttar Pradesh, and Tamil Nadu are the five top states in terms of loan amount outstanding, accounting for 53 per cent of total GLP of the NBFC-MFI segment.