Portfolio quality has also improved as depicted by PAR or portfolio at risk at 0.99% as of September-end this year
Microfinance players are on a roll, achieving 50% growth in aggregate loan portfolio for the first half of the current financial year (FY). This comes at a time when mainstream non-banking finance companies (NBFCs) continue to falter under tightened liquidity and shrinking businesses.
This growth seen in the first half of this fiscal indicates a reversal in fortunes of the microfinance sector, which had seen its loan book growth falling from a high of 72% achieved in FY2015-16 to 29% in FY2016-17 and further to 27% in FY2017-18.
For two straight quarters, the lenders of small loans, excluding those like Bandhan which has now turned into a full-scale bank, have grown by 50%, confirming that reversal in their fortunes and coming out of the stress they had suffered post demonetization when cash loans got halted.
The microfinance industry witnessed a growth of 51% on-year in the second quarter (Q2) with total gross loan portfolio (GLP) at Rs 1,46,741 crore, according to the just-released quarterly report by MicroFinance Institutions Network. Of this, the share of NBFCs operating as micro-lenders grew 50% on-year with GLP of Rs 54,018 crore.
"While the total number of active microfinance accounts for the overall industry was at 7.77 crore in Q2, a growth of 27%, NBFC-MFIs witnessed a growth of 32.9% in active loan accounts with 3.43 crore accounts in the same period," the report said.
In the second quarter of the previous fiscal, the loan portfolio of microfinance firms had grown only 24%, which is half the current growth rate.
The portfolio quality of the entire microfinance industry has also improved significantly during this period as depicted by PAR or portfolio at risk at 0.99% as of September-end this year. The PAR for NBFC-MFIs was at 2.87% as of September 2017 to 1.01% in the first half of this year.
"Last year, the sector was recovering from the demonetization shock. This year, that impact is gone. The recovery has come on the back of rapid growth in select states mainly in the eastern part of the country, with growth in both the loan sizes as well as rise in the number of borrowers. We see similar growth in the rest of the year as well," Harsh Shrivastava, chief executive officer of MFIN told DNA Money.
According to MFIN's quarterly report, Karnataka, Odisha, Bihar, Tamil Nadu and Maharashtra are the top five states in terms of GLP, accounting for 52% of the total loan portfolio of NBFC-MFI segment.
In terms of regional distribution of portfolio (GLP), East and North-East account for 36% of the total NBFC-MFI portfolio, followed by South at 26% with northern and western regions contributing 15% each while central contributing 8%.
MONEY MATTERS
- The industry total gross loan portfolio grew 51% on-year to Rs 1,46,741 crore in Q2. Of this, share of NBFCs operating as micro-lenders grew to Rs 54,018 crore
- The loan book growth had fallen from a high of 72% achieved in FY2015-16 to 29% in FY2016-17 and further to 27% in FY2017-18
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