Research Notes1

Microfinance industry in India grew 44% yoy by March 2019 against a growth of 31% in the previous year and the industry’s gross loan portfolio (GLP) stood at `18850 billion, according to a study by credit information bureau CRIF Highmark, which has a specific focus on the microfinance sector. The study highlights that this growth has been significantly driven by addition of new borrowers with the sector having an outreach of 56 million active borrowers, which is a growth of 22% yoy by March 2019.

CRIF Highmark says the average microfinance exposure per borrower has risen by 22% yoy to `35,100 and the number of active microfinance loans is 96 million, which is a 26% yoy growth with nearly 1.7 active microfinance loans per borrower by March 2019. The ticket size also grew by 1 2.7% yoy to `31,100.

Another highlight brought out by the study is that the East, including the Northeast region, had a 26% yoy growth in the borrower outreach, the West ~23%, and South just 14% new borrowers. The rural microfinance lending continues to accelerate with a 50% growth in the book size while the urban book grew just by 19%. The rural portfolio is 54 % of the overall gross loan portfolio.

The study finds that the Portfolio at

Risk (PAR) 1-30 days past due, which CRIF Highmark says indicates the early delinquency rates, has gone up a full percentage point to 2.8% in March 2019 as compared to 1.8% in March 2018. The risk level for PAR 31-180 has reduced from 1.5% in March 2018 to 1.0% in March 2019. A similar trend has been observed in case of PAR 180+ level, which has improved substantially on a from 6.4% to 4.6%, while the incremental write-offs have reduced through the last fiscal year.

The study says NBFC-MFIs have the largest market share of microfinance loans at 36%, closely followed by banks at 33%, small finance banks at 19% and others 12%. It points out that the market share of small finance banks continues to decrease. Urban geographies constitute 58% of small finance banks’ portfolio, while that of banks, NBFCMFIs and others ranges between 41%-47% as of December 2018.

The study finds that top 10 states account for 84% of the GLP. “Overall, eastern region dominates the market share with 40% of the total GLP share, followed by southern region (27%), western region (14%). Central & north eastern region have a ~8% of the national GLP. The portfolio yoy growth is high in North East (62%) & East (46%) while growth in South (40%), West (43%) and Central regions (38%) is below the national portfolio growth (45%),” it says.

The study also adds that West Bengal has marginally surpassed Tamil Nadu as the largest market with ~15% share of the national GLP. Assam (62%), Bihar (59%), West Bengal (47%) and Tamil Nadu (47%) have the highest yoy growth in the book size. Bihar now has a larger book size than Karnataka and Assam and leads Orissa in terms of the book size. The growth in Bihar and Assam is driven by growth in rural lending upwards of 60% yoy while West Bengal has a 48% growth in the rural book size as compared to Tamil Nadu which has a 46% growth in the rural book size.

Another aspect brought out by the study is that Tamil Nadu has 41% of the portfolio in the 25K-30K range, whereas West Bengal and Assam have only 17% of the portfolio in this ticket size segment. West Bengal & Assam continues to have around 41% of its portfolio in the 60K+ ticket segment while the rest of the states show a decent distribution of the portfolio across ticket size segments, with around 1/3rd of the national portfolio in the 25K-30K range. Nearly 6.58% borrowers from Tamil Nadu have loans running with 4 or more lenders and this number has sharply risen from 1.46% in March 2018. The gross loan portfolio for Tamil Nadu has grown by 47% yoy.