MFIS see robust growth despite bad loan woes

Microfinance institutions (MFIS) recorded a year-on-year (YOY) growth of 29.26 per cent in FY20, even as portfolio risk remained on the higher side.

Data by the Microfinance Institutions Network (MFIN) — a representative body for MFIS — showed gross loan portfolio (GLP) of the sector at ~2.3 trillion, as on March 31, 2020. The figure stood at ~1.8 trillion for March 31, 2019.

At the same time, PAR>30 (portfolio risk for above 30 days) increased from 1 per cent during Q4FY19 to nearly 1.8 per cent at Q4FY20.

“PAR figures continue showing an increasing trend vis-à-vis previous quarters, but portfolio health is within acceptable limits,” according to MFIN. During FY20, NBFC-MFIS received ~42,150 crore in debt funding (from banks and other financial institutions). This represents growth of 33 per cent compared to FY19, when they received ~31,688 crore.

Banks hold the largest share of portfolio in microcredit, with total loan outstanding of ~92,281 crore, which is 39.8 per cent of the total microcredit universe.

NBFC-MFIS are the second-largest provider of microcredit, with loan amount outstanding of ~73,792 crore — accounting for 31.8 per cent of the industry portfolio.

SFBS have total loan amount outstanding of ~40,556 crore, with a total share of 17.5 per cent. NBFCS account for another 9.8 per cent, while other

MFIS account for 1.1 per cent of the overall portfolio.

The five top states in terms of loan amount outstanding are Bihar, Karnataka, Tamil Nadu, Maharashtra,

and Odisha. They account for 49 per cent of GLP, with the top 10 states accounting for 79 per cent of the total loan outstanding.

During FY20, NBFC-MFIS disbursed loans worth ~77,072 crore, nearly 23 per cent in loan amount disbursed. The top 10 MFIS, in terms of loan amount disbursed, accounted for 70 per cent of industry disbursements in FY20.

Harsh Shrivastava, chief executive of MFIN, said: “In a difficult year, it is heartening that microfinance was able to get more liquidity from lenders and, in turn, increase its outreach by adding new branches, hiring more staff, and thus reaching more borrowers.”

Average loan disbursement per account in FY20 stood at ~27,754, compared to ~26,196 for FY19. More than 92 per cent of MFI loan disbursement in FY20 took place through the cashless route, compared to 85 per cent in FY19.