Microfinance collections dip 20% with second wave

Microfinance collections, which had returned to preCovid levels by March, have dropped 20 per cent with the second wave of the pandemic. Disbursements too have come down by more than half.

MFIs had gradually reached close to pre-Covid levels in terms of collection by March. Overall collection rate in March 2021 was at 95-98 per cent. In a few weeks since then, the situation has altered drastically with the onslaught of a second wave of the pandemic. Collections have dropped by 10 to 20 per cent in April-May 2021 as the lockdown was imposed in various key states across the country, finds Sa-Dhan.

“In the first wave, there was a moratorium, but this time there is no moratorium. Though microfinance is considered as an essential service, our personnel are not able to meet the customers within the small time window available for them. However, digital payments are taking care of 70 to 80 per cent of the collections,’ said Manoj

Nambiar, chairperson, MicroFinance Institutions Network (MFIN).

Emergence of digital collections through cards, QR code and Bharat Bill Payment System have helped collections to improve gradually.

The localised lockdowns have also affected the disbursements. “Disbursements in April-May would be lesser than March levels by 50 per cent or more. Businesses are closed and MFIs are also cautious that they do not overburden the customers with additional credit. However, as the lockdowns get lifted, disbursements would improve,” said Nambiar.

However, Portfolio at Risk for over 180 days has increased to 6.70 per cent in the March quarter from 4.75 per cent in the previous quarter, though shorter-term buckets have registered improvement. “This is certainly a worry as these are customers who are really in distress. Unemployment levels are once again up and incomes have been affected both in rural and urban areas. Savings have been depleted in the first wave itself.”