MFI's on Consolidation path - A CRIF High Mark Report

While microfinance institutions (MFI) are yet to tide over the impact of the currency demonetisation, intense competition and reports of over-borrowing have surfaced as new grey areas.
CRIF High Mark says of about 42 million unique MFI customers, six per cent have loans with more than two lenders. And, a third of these customers have active loans with more than two non-bank MFIs (NBFC-MFIs). Further, the report says, 70 per cent of such borrowers have three or more loans; 17 per cent are even servicing five loans at a time.
According to the report by CRIF growth over the past three years or High Mark, top-up loans are a poten- so. This, fortunately, has not trans-tial source of over-heating in the MFI lated into a crisis. The reasons are pri-market. These are defined by High marily the greater institutional Mark as loans of *10,000 or less, and strength of MFIs, the extent of the acquired or have seen stake purchases by banks. Hence, there is already a consolidation in the space. The cost of funds for small and mid-sized MFIs is higher compared to the MFIs which became banks. More, interest rates (that they charge borrowers) are capped by RBI guidelines. So, the smaller players will face more challenges. Some of them might need to diversify or merge with bigger players says Kalpana Pandey, CEO at CRIF High Mark.

Full Report : Business Standard