MFIS witness a steady gain in rural recoveries
Borrowers clearing dues despite moratorium option
Rural customers of most microfinance institutions (MFIS) are steadily clearing their dues, despite the extension in moratorium. Most MFIS are expecting above 50 per cent recovery in June, backed mostly by rural repayments.
Income from the harvesting season, along with the essential nature of rural occupations, has helped rural borrowers be more resilient to the economic slowdown.
According to MFIS, recoveries from rural areas in May were higher by 10-20 per cent compared to urban areas.
Majority of MFI borrowers have the option to avail of the moratorium till the end of August. Creditaccess Grameen, which has about 85 per cent of its borrowers in rural areas, offered a blanket moratorium on repayment for April and May. In June, the MFI is eying 70 per cent recovery.
Based on interactions with borrowers over the past 15 days, the MFI has estimated that 70 per cent of its customers are willing to repay in the present month, while 20 per cent have sought additional time of 15-30 days. The remaining 10 per cent, who are urban borrowers, have expressed inability to repay soon.
“Besides harvesting income, the essential nature of services in rural areas such as agriculture and dairy are likely to help in recoveries. These sectors have already been functioning over the last 4-5 weeks,” said Udaya Kumar Hebbar, MD and CEO of Creditaccess Grameen.
According to Manoj Nambiar, chairman of MFIN (Microfinance Institutions Network), a representative organisation of microfinance institutions the percentage of recovery is from 20-40 per cent across geographies, though in some rural pockets it is as much
as 40 per cent. “Recoveries are better in rural areas. First, with income from harvesting, people are able to repay the loans. Second, livelihoods in rural areas are less affected by Covid,” said Nambiar.
P Satish, executive director of Sa-dhan, another microfinance representative body, said that while the overall recovery in April was about 89 per cent, it had risen to 15-16 per cent in May. “Roughly, if recoveries in urban areas are in the range of 11-12 per cent, in rural areas they are 15-16 per cent,” said Satish.
According to Rahul Mittra, CEO of Margadarshak Financial Services, a rural focused organisation with operations in the agriculture belt of UP and Bihar; recovery for May was 25-30 per cent, compared to almost nil in April.
“We are looking to nearly double the recoveries in June,” said Mittra.
As of December 31, 2019, NBFC-MFIS had about 30 million customers, with an aggregate gross loan portfolio at ~67,320 crore. Due to favourable climatic conditions, India’s food grains production is estimated at a record 291.95 million tonnes (mt) for the 2019-20 crop year (July-june), beating the target of 291 mt.
Foreign funding
Satya Microcapital and Sindhuja Microcredit have raised funding of ~105 crore and ~65 crore, respectively. The funding is from Japan’s Gojo & Company for Satya, and Norway firms Nordic Microfinance Initiative and Carpediem Capital for Sindhuja.
“This clearly shows the confidence that equity investors have in the Indian microfinance sector, and on its capacity to bounce back and manage its portfolio qualities, making it a safe and viable impact investment,” said Harsh Shrivastava, CEO of MFIN.