Money & Banking

‘Collection efficiency, recent verdict of SC likely to help industry post good growth this year’

The microfinance industry, which witnessed nearly 27 per cent growth in disbursals and a marked improvement in collection efficiency during the fourth quarter of financial year FY22, is poised to register a good growth this fiscal.

According to Alok Misra, CEO & Director, MFIN (Microfinance Institutions Network), the announcement of harmonised regulations for microfinance, near normalisation of collection efficiency, and the recent verdict of Supreme Court stating that NBFC regulation is the sole purview of the Reserve Bank of India, are likely to augur well for the industry’s growth during the current fiscal.

Microfinance loan disbursals during FY22 grew by nearly 27 per cent at ₹2,39,433 crore, compared to ₹1,88,471 crore in the last fiscal. The number of loans disbursed also saw an increase during FY22 to 6.3 crore from 5.2 crore in FY21, indicating continued growth of microfinance portfolio.

Total loan portfolio

The total loan portfolio of the sector grew by around 10 per cent at ₹2,85,441 crore as on March 31, 2022, serving 5.8 crore unique borrowers with 11.3 crore loan accounts, according to the latest Micrometer report for Q4 FY22 put out by MFIN. The gross loan portfolio (GLP) stood at ₹2,59,377 crore as on March 31, 2021.

The GLP of NBFC-MFIs stood at ₹96,561 crore as on March 31, 2022, which is almost 19 per cent growth year-on-year, compared to ₹80,906 crore in the same period last year. The GLP includes owned portfolio of ₹82,458 crore and managed portfolio of ₹14,104 crore.

“The microfinance industry has shown good progress during Q4 FY22, building on the momentum created in Q3. The portfolio quality has improved significantly when compared to the end of Q1 FY22, when the second wave of Covid had caused widespread stress across all parts of the country,” said Misra in a statement.

Deviation from past trends

There has been some deviation from the past trends in FY22, MFIN observed. Though banks continued to be the main contributors, accounting for nearly 40 per cent of the microcredit portfolio, the proportion of NBFC-MFIs in the overall microfinance sector increased by a little over four per cent to 35 per cent as on March 31, 2022.

The geographical distribution of portfolio has also witnessed a change, with a decrease in the share of east and north-east by nearly three per cent, while the share of south and north regions have increased by a little over one per cent each. Tamil Nadu is now the largest State in terms of portfolio outstanding, followed by Bihar, displacing West Bengal to the third spot, said the report. 

NBFC-MFIs received a total of ₹47,931 crore in debt funding during FY22, which is an 18 per cent increase from FY21. The total equity of NBFC-MFIs grew by 15 per cent year-on-year to ₹21,419 crore as on March 31, 2022.

Published on June 15, 2022