Tag: MicroFinance Institutions Network

MFIN, BFSI News, ET BFSI

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The microfinance industry’s gross loan portfolio (GLP) rose 4.2 per cent to Rs 2,37,369 crore as of June 30, 2021, compared with Rs 2,27,727 crore as of June 30, 2020, according to a report by Microfinance Institutions Network (MFIN). Microfinance loan disbursals during the first quarter of the financial year 2021-22 improved significantly to Rs 25,503 crore, compared with Rs 6,186 crore in the corresponding quarter last year.

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates including banks, small finance banks (SFBs) and non-banking financial companies (NBFCs).

It released the Micrometer report for the April-June 2021 quarter on Tuesday.

The report showed that 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of Rs 1,02,405 crore, which is 43.14 per cent of the total micro-credit universe.

NBFC-MFIs are the second-largest provider of micro-credit with a loan amount outstanding of Rs 75,021 crore, accounting for 31.61 per cent of the total industry portfolio.

SFBs have a total loan amount outstanding of Rs 38,624 crore with a total share of 16.27 per cent. NBFCs account for another 7.89 per cent, and other MFIs account for 1.09 per cent of the universe, it said.

As of June 30, 2021, the microfinance industry served 5.68 crore unique borrowers, through 10.30 crore loan accounts, the report showed.

The microfinance active loan accounts decreased by 0.67 per cent during the past 12 months to 10.30 crore as of June 30, 2021, it said.

The report said the gross loan portfolio (GLP) of NBFC-MFIs stood at Rs 76,237 crore as of June 30, 2021, a 6.9 per cent year-on-year rise as compared to Rs 71,301 crore as of June 30, 2020.

Loan amount of Rs 6,511 crore was disbursed in Q1 FY 2021-22 by NBFC-MFIs through 17.97 lakh accounts, compared with Rs 561 crore disbursed in Q1 FY 2020-21 through 1.99 lakh accounts.

NBFC-MFIs received a total of Rs 3,596 crore in debt funding during the April-June quarter of this fiscal, which is 39.6 per cent lower than that in the year-ago period.

Total equity of the NBFC-MFIs grew 11.9 per cent year-on-year to Rs 18,660 crore as of June 30, 2021. PTI HV HRS hrs



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India Ratings retains overall negative outlook for microfinance institutions, BFSI News, ET BFSI

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FILE PHOTO: A customer hands Indian currency notes to an attendant at a fuel station in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas

India Ratings and Research has maintained an overall negative outlook on the microfinance sector for the second half of the current financial year due to liquidity concerns in small and mid non-bank microfinance institutions, which could lead to a constraint in their disbursements.

The ratings agency retained a stable outlook for the large and strong sponsor-backed microfinance institutions, while small and mid non-bank microfinance institutions, including those with over 50% of assets under management in microfinance, were on a negative outlook rating.

Liquidity constraints of small and mid-sized companies could have a larger impact on Kerala and West Bengal, while harmonisation guidelines, government guaranteed loans, mechanism of Assam debt waiver and equity raise by some of these companies in the second half of the year could support sentiment in the near term.

According to the agency, microfinance institutions can be categorised as per their funding access. For most large companies, bank funding lines could continue and they may not face immediate liquidity stress. However, small and mid-size companies would need to conserve their liquidity, which could to a lag in their performance.

“The lower rated (BBB and below category) entities have witnessed a rising trend in incremental cost of borrowing which is not the case with large entities. If they are able to get a disproportionate share in government guarantee backed loans, it could help them in funding cost,” the agency said in its report.

Credit costs for microfinance institutions are likely to be in the range of 5%-10% this financial year, depending on their size and scale, access to liquidity, that is the ability to continue to disburse, and geographic concentration, the ratings agency said.

India Ratings also noted the recovery efforts taken by microfinance institutions. The collection efficiency improved over July-August 2021 from June 2021, given that around 70% of the borrowers were in the essential goods and services segments. The current collection efficiency at the end of June lagged behind March levels by 15%-20%, according to the agency.



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Microfinance sector hit as defaults surge in pandemic, BFSI News, ET BFSI

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MUMBAI: Small loan specialists in India that typically cater to people without bank accounts are facing a jump in pandemic-related defaults that could force some of them out of business, industry experts warn.

Loans overdue by 30 days are expected to reach 14-16% of all so-called microfinance loans in the immediate aftermath of the second Covid-19 wave sweeping India, said Krishnan Sitaraman, senior director at credit rating agency CRISIL.

That’s higher than 6-7% in March, before the second wave took hold, and also above the 11.7% reached in March 2017 after demonetisation drive – an attempt to boost digital transactions and crack down on undeclared money that also hit microfinance lenders hard.

“Older loans that were taken in 2019 or early 2020 are at a higher risk of defaults and they form about 60-65% of the loan book for lenders,” said Harsh Shrivastava, former head of the Microfinance Institutions Network, an association representing the sector in India.

Rahul Johri, chair of Vector Finance, a microfinance firm that provides loans to small enterprises, said many support measures brought in by the government had only helped larger institutions, while smaller players had struggled.

“It has become an existential issue for several small and mid-sized microfinance institutions as the business has been severely impacted and collections are down,” said Johri.

Loan collection efficiency across the total loan pool has fallen to about 70% from a peak of nearly 95% in March, analysts say, indicating a potential build-up in stress.

The gross loan portfolio of India’s microfinance lenders stood at 2.6 trillion rupees ($35 billion) as of March 31, according to CRISIL.

Bumpy road ahead

Despite the short-term challenges, some remain bullish on the sector and expect it to bounce back if an anticipated third wave of Covid-19 infections in India is not so severe.

“About 55% of the market is still untapped which means there is a huge market opportunity … so things will look up soon,” said Johri.

But for now, many smaller microfinance firms are struggling.

Such companies, typically with loan books of less than Rs 500 crore ($67 million), have also seen their cost of funds rise by 100-150 basis points as banks and companies have become less willing to lend to them, said one industry executive, speaking on condition of anonymity.

Some microfinance firms have had to scale back capital raising plans due to tepid interest from investors, said the heads of two firms that have been looking to raise funds.

As smaller players falter, some have stopped paying salaries, or incentives to employees in recent months, they added, asking not to be identified due to the sensitivity of the matter.

“We are now only getting basic salaries, incentives have completely stopped in the last few months as collections are down,” said a collection agent at one microfinance lender in eastern India.



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Microfinance loan portfolio grows 11.9% to ₹2,59,377 cr as on March-end: MFIN

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The overall microfinance industry’s gross loan portfolio (GLP) surged by 11.9 per cent to ₹2,59,377 crore as on March 31, 2021 from ₹2,31,787 crore as on March 31, 2020, says a report.

The growth was driven by an addition of four lakh borrowers during the pandemic-struck 12-month period ending March 2021, according to a report – Micrometer, released by Microfinance Institutions Network (MFIN).

Also read: In a boost to MFIs, FM hikes ECLGS limit by ₹1.5-lakh cr

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs. As on March 31, 2021, the microfinance industry served 5.93 crore unique borrowers, through 10.83 crore loan accounts, the report said.

It said 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of ₹1,13,271 crore, which is 43.67 per cent of total micro-credit universe.

Non-banking financial companies-microfinance institutions (NBFC-MFIs) are the second-largest provider of micro-credit with a loan amount outstanding of ₹80,549 crore, accounting for 31.05 per cent to total industry portfolio, the report showed.

SFBs have a total loan amount outstanding of ₹41,170 crore with a total share of 15.87 per cent.

NBFCs account for another 8.36 per cent, and other MFIs account for 1.05 per cent of the total microfinance universe, it said.

The report further showed that the gross loan portfolio of NBFC-MFIs increased by 11 per cent to ₹81,475 crore as on March 31, 2021, compared to ₹73,412 crore as on March 31, 2020.

This GLP on NBFC-MFIs includes owned portfolio of ₹68,894 crore and managed portfolio of ₹12,581 crore, it said.

The association said its NBFC-MFI members disbursed ₹57,891 crore of loans in fiscal 2020-21 through 1.70 crore accounts.

Also read: RBI proposes regulatory framework for microlenders

Average loan amount disbursed per account during FY20-21 was ₹35,726, an increase of around 20 per cent in comparison to last financial year, the report said.

During FY2020-21, NBFC-MFIs received a total of ₹40,797 crore in debt funding which is 9.2 per cent higher than in FY2019-20.

Total equity of the NBFC-MFIs grew by 15 per cent to ₹18,663 crore as on March 31, 2021.

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Assam’s microfinance loan collection efficiency to return to normalcy by the end of financial year

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Assam, which has been experiencing stress in collection efficiency in microfinance loan portfolio since September 2019, is likely to come back to “normalcy” by the end of this financial year.

According to Manoj Nambiar, Chairman, Microfinance Institutions Network (MFIN), the relief measures announced by the Assam Chief Minister, Himanta Biswa Sarma, has focused on responsible borrowing, repayment and lending.

The Assam government had, on Friday, announced a special one-time relief to MFI borrowers in the State under three broad categories. It has announced a sum of ₹25,000 for each regular client as an incentive to them to continue maintaining good credit discipline. For those borrowers who are overdue or have turned into NPA (non-performing asset), the State government will pay the amount which is overdue to make them regular with institutions and their credit bureau records. For those categories of customers who are stressed and impacted by the Covid pandemic leading to a loss of livelihood, the State government would pay the lenders to clear the outstanding loan.

Optimistic outlook

“The relief measure announced by the State government will go to the Cabinet and then we expect implementation of measures by early August. We have already started getting calls from borrowers post the press conference by the Chief Minister. We still have three quarters to go and we are hopeful that when we close the financial year 2021-22 ,we will see a different Assam as compared to what it was in FY-21,” Nambiar told media at a virtual press conference on Monday.

Assam had a delinquency rate as low as 0.32 per cent till September 2019 and has been one of the best States on portfolio quality. However, since October 2019, local reaction to multiple lending and non-payment, followed by the Covid-19 lockdown and the moratorium led to uncertainty in the State over expectations on loan waivers.

According to Alok Misra, CEO and Director, MFIN, the measures announced by the government would help provide relief to borrowers in stressed times. “Not only have measures been taken to incentivise the regular clients, but the government has thoughtfully addressed the overdue/NPA clients as well, with the objective of making them regular. The governments focus on maintaining credit discipline is evident through incentivising microfinance clients to maintain good repayment records,” he said.

The microfinance industry in Assam serves over 26 lakh low income women clients with a loan outstanding of around ₹12,500 crore from RBI regulated entities including universal banks, SFBs, NBFC-MFIs and NBFCs. However, the relief announced on Friday has been for a maximum outlay of ₹8,250 crore which has been arrived after applying filters of a maximum of three lenders to a borrower, ₹1.25 lakh exposure of an individual client of JLG methodology and interest rates to the total state loan outstanding of 12,535 as on March 31, 2021.

So around ₹4,000 crore would not strictly fall under the category of microfinance loans and hence would not qualify for relief.

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MFIN CEO, BFSI News, ET BFSI

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The microfinance sector is unlikely to face major challenges from the second wave of COVID-19 and is well prepared to face any disruption, Microfinance Institutions Network (MFIN) CEO Alok Misra said.

Over the past year, microfinance institutions (MFIs) have streamlined their processes, trained field staff on COVID-appropriate behaviour and in dealing with lockdowns, and focussed on digitisation, and these steps will help them in managing any kind of situation, he added.

“In the last one year, training, involvement of senior-level people at the ground level and digital content have ensured that the (MFI) sector is far better prepared (now) than when it (COVID-19) hit us last year,” Misra noted.

Till the time the pandemic continues, there will be local level lockdowns that would create medium to minor level disruptions to livelihoods, but the industry has learned to live with it, he said.

“I can’t say that it would be normal to pre-COVID days. Some impact would be there, but it would be minimal, which will not be debilitating on the industry,” Misra added.

MFIN is an RBI-recognized self-regulatory organisation (SRO) for the microfinance industry. It has 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs as its members.

Misra said the MFI industry is adopting innovative methods to reach out to their clients, keep the connect going on and survive.

Rating agency Icra Ratings in a recent report said the overall long-term growth outlook for the domestic microfinance industry, including microfinance institutions (MFI) and micro finance-focused small finance banks (SFB)s, remains robust, even though the near-term outlook is clouded given the COVID-19 induced disruptions.

It, however, said the asset quality pressures for the MFI industry will continue in the near term and the same may get accentuated with the recent increase in COVID-19 infections and localised restrictions/lockdowns.

“Nevertheless, improving collection efficiency, good on-balance sheet liquidity and capitalisation should help most entities to withstand the stress,” the agency added.

MFIN releases performance numbers of MFIs every quarter. The fourth-quarter numbers are yet to be declared.

Misra said during the third quarter of FY21, the sector disbursed around Rs 60,000 crore, similar to the corresponding quarter of FY20.

“If I extrapolate that (Q3 FY21 trend) then the disbursement pattern in January-March, when the COVID-19 situation was better than Q3, would have been normal,” he said.

The collection efficiency of MFIs in the fourth quarter stood at close to 92 per cent, he added.



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