Microfinance loan disbursements expected to reach normal levels by Q4-end

The microfinance industry is slowly inching towards pre Covid levels, both in terms of disbursements as well as the quality of portfolio. Disbursements in Q3 FY21 was around 96 per cent of the same period last year.

In the 36th issue of the Micrometer, MFIN (Microfinance Institutions Network) said that disbursements are expected to reach normal levels by the end of Q4 FY21 on the back of increased demand for loans.

The gross loan portfolio (GLP) of the microfinance industry stood at ₹2,32,648 as on December 31, 2020, an increase of around 10 per cent against ₹2,11,302 crores as on December 31, 2019.

Sequentially, loan disbursals during the October to December 2020 quarter jumped by over 90 per cent to ₹59,507 crore compared to ₹31,261 crore during Q2 FY21. The number of loans disbursed also doubled to 1.79 crore (0.88 crore), signifying steady progress towards normalcy.

The GLP of NBFC-MFIs grew by nearly 11 per cent at ₹74,712 crore as on December 31, 2020, compared to ₹67,255 crore in the same period last year. Sequentially, it increased by five per cent, compared to ₹71,147 crores as on September 30, 2020.

“It is heartening that the green shoots seen at the end of Q2 have proved to be true and sector disbursements are reaching almost at pre-Covid levels, backed by increased demand for loans to restart livelihoods. The disbursements during Q3 FY21 are around 96 per cent of Q3 FY20, indicating that it should reach normal levels by the end of Q4 FY21,” said Alok Misra, CEO and Director, MFIN, in a press statement.

Collection efficiency

There has also been an improvement in liquidity and the industry has been receiving funding support, both by way of debt and equity.

NBFC-MFIs received a total of ₹10,876 crores in debt funding, which is over 10 per cent higher compared to ₹9,854 crore in Q2 FY21.

Total equity of the NBFC-MFIs grew by nearly 17 per cent to ₹18,077 crores as on December 31, 2020, compared to ₹15,508 crore in the same period last year.

“The lenders and investors continue to show full confidence in the sector as evident by the debt funding going up 10.4 per cent compared to the previous quarter and equity moving up 16.6 per cent compared to the corresponding quarter last year,” Misra said.

Despite geographical variation, the portfolio quality is moving in the range of around 88-92 per cent.

The microfinance industry serves around 5.83 crore unique borrowers with 10.50 crore loan accounts.

The average loan disbursement per account for Q3 FY21 stood at ₹34,070, which is almost 19 per cent higher compared to ₹28,620 in the same period last year.

Banks hold the largest share of the portfolio in micro-credit, with a total loan outstanding of ₹97,956 crore, accounting for around 42 per cent of the total advances. NBFC-MFIs account for around 31 per cent at ₹72,128 crore, small finance banks hold around 17 per cent at ₹39,062 crore, NBFCs account for another nine per cent, and other MFIs account for around one per cent of the total loan portfolio.

In terms of regional distribution of GLP, east and north east account for 41 per cent of the total NBFC-MFI portfolio; south 27 per cent, west 14 per cent, north 11 per cent; and central eight per cent.

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