East, North-East take the lead in NBFC-MFI loan port­fo­lio

But ex­perts say de­faults are likely due to in­creas­ing com­pe­ti­tion in the re­gion

The Hindu Business Line - - BANKING - SHOBHA ROY

Talk mi­cro­fi­nance and it was the south­ern States of Andhra Pradesh, Kar­nataka and Tamil Nadu that fea­tured on top of the list – both in terms of the num­ber of bor­row­ers and gross loan port­fo­lio. But now, east and north-eastern States are clearly tak­ing the lead.

Ac­cord­ing to the Mi­crom­e­ter re­port, re­leased by Mi­cro­fi­nance In­sti­tu­tions Net­work (MFIN), east and North-East ac­count for nearly 35 per cent of the to­tal NBFCMFI port­fo­lio as on June 2018 against 16 per cent two years ago (June 2016). The share of South In­dia, which stood at 35 per cent in 2016, has come down to 26 per cent in 2018.

“East and north-east were typ­i­cally un­der-pen­e­trated mar­kets. How­ever, a num­ber of MFIs are now ex­pand­ing into the re­gion, ex­tend­ing credit to more cus­tomers, which has cre­ated em­ploy­ment op­por­tu­ni­ties and eco­nomic growth and devel­op­ment in the re­gion,” Harsh Srivastava, CEO, MFIN, told Busi­nessLine.

The eastern States of Odisha, Bi­har and West Ben­gal, which were wit­ness­ing 11 per cent, 13 per cent and 15 per cent growth, re­spec­tively, in loan port­fo­lio, in 2016, have seen a sharp spike. As on June 2018, Odisha grew 69 per cent to ₹5,849 crore, Bi­har by 69 per cent to ₹5,457 crore, and West Ben­gal by 70 per cent to ₹3,937 crore. The to­tal as­set base of NBFC-MFIs, as on June 2018, stood at ₹53,181 crore.

Ac­cord­ing to Kuldip Maity, MD & CEO, Vil­lage Fi­nan­cial Ser­vices, the growth is sup­ported by the in­crease in num­ber of bor­row­ers and not by the higher ticket-size of the loan given to them.

‘Demo ef­fect’

MFIs had wit­nessed a sub­stan­tial drop in col­lec­tion rates and a rise in non-per­form­ing as­sets af­ter de­mon­eti­sa­tion in Novem­ber 2016.

The prob­lem was more in­tense in the west and North In­dia and also in some pock­ets of South In­dia. How­ever, eastern and north-eastern States were Harsh Srivastava, CEO, MFIN

fairly re­silient, and the as­set qual­ity was bet­ter com­pared to other States, said Supreeta Ni­j­jar, Vice-Pres­i­dent and Sec­tor Head, Fi­nan­cial Sec­tor Rat­ings, ICRA.

“This (bet­ter re­pay­ment record) en­cour­aged a num­ber of MFIs to ex­pand into the re­gion, thereby giv­ing a spurt to growth,” she said.

How­ever, while the eastern and north-eastern States have not wit­nessed any wide­spread de­fault till now, in­creas­ing com­pe­ti­tion and higher con­cen­tra­tion could lead to over­lever­ag­ing of bor­row­ers, caus­ing over-in­debt­ed­ness and de­faults, an in­dus­try ex­pert said.

“Odisha and Bi­har, un­like West Ben­gal, do not have a very good credit ab­sorp­tion ca­pac­ity, so one needs to be care­ful,” he pointed out.

Ac­cord­ing to Manoj Ku­mar Nam­biar, MD, Aro­han, the in­dus­try is com­ing up with a mu­tu­ally agreed code of con­duct to pre­scribe cer­tain healthy lend­ing prac­tices to be vol­un­tar­ily fol­lowed by all play­ers, in­clud­ing NBFC-MFIs, NBFCs, banks and small fi­nance banks, to en­sure that bor­row­ers are not over-lever­aged. The draft would be ready by De­cem­ber.

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