Microfinance gross loan portfolio jumps 18% in FY23; write-offs up by 7.7%: Report
Credit and finance for MSMEs: Non-banking financial company-microfinance institutions (NBFC-MFIs) continued to dominate the market with a portfolio share of 37.3 per cent amounting to Rs 1.26 lakh crore followed by banks with 33.1 per cent share worth Rs 1.11 lakh crore.
Credit and finance for MSMEs: The gross loan portfolio (GLP) or portfolio outstanding of the microfinance sector grew 17.9 per cent year-on-year (YoY) as of March 2023 to Rs 3.37 lakh crore from Rs 2.86 lakh crore as of March 20222, according to the latest quarterly report on microfinance lending by credit bureau Crif High Mark. Quarter-on-quarter (QoQ), the GLP grew by 6.6 per cent from Rs 3.16 lakh crore as of December 2022.
Non-banking financial company-microfinance institutions (NBFC-MFIs) continued to dominate the market with a portfolio share of 37.3 per cent amounting to Rs 1.26 lakh crore followed by banks with 33.1 per cent share worth Rs 1.11 lakh crore and small finance banks with 16.6 per cent share worth Rs 56,075 crore during March quarter. YoY, the share increased by 32.2 per cent for NBFC-MFIs, 3.6 per cent for banks, and 14.5 per cent for small finance banks.
Sanjeet Dawar, Managing Director, CRIF High Mark, said the microfinance sector in the rural markets witnessed growth, soaring by 22.3 per cent year-on-year, while the urban markets experienced an increase of 11.4 per cent. “The microfinance sector in India today is growing rapidly, allowing small borrowers access to formal credit. This is fostering greater financial inclusion,” he said.
In terms of portfolio quality, the portfolio delinquent by over 30 days past due (DPD) improved from 6 per cent of GLP as of March last year to 2.2 per cent of GLP as of March 2023. The proportion of portfolio delinquent by over 90 DPD also improved from 2.7 per cent as of March 2022 to 1.1 per cent as of March this year. However, the portfolio at risk by over 180 DPD deteriorated to 9.1 per cent as of March 2023 from 8.4 per cent as of March last year even as QoQ, it improved from 10 per cent as of December 2022.
Moreover, write-offs also increased from 4.8 per cent of GLP as of March last year and 6.6 per cent as of December to 7.7 per cent as of March 2023.
The microfinance sector’s growth is expected to continue with around 25 per cent YoY year-on-year (YoY) jump in assets under management (AUM) in the current financial year, driven by steady disbursement growth and an improving macroeconomic environment, said a report by credit rating agency CareEdge in April.
“Predominantly, the growth in India’s microfinance sector is fueled by the imperative need for financial inclusion, especially in the underserved rural and remote areas that lack traditional banking infrastructure. Accessible micro-loans are empowering numerous individuals to rise above poverty, thereby catalyzing small-scale entrepreneurship and invigorating local economies,” Nitin Purswani, CEO, Medius AI told FE Aspire. The company provides debt collection solutions to banks and NBFCs.
In terms of asset quality, CareEdge expected asset quality pressure to ease as the restructured portfolio decreases while the gross non-performing asset (GNPA) ratio is also anticipated to decrease to 3 per cent by the end of fiscal 2024 from an expected 3.5 per cent by FY23 end, although it will remain high compared to pre-Covid levels.
Source: Publication: Financialexpress ,5th July,2023