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The microfinance sector recorded 21 per cent portfolio growth at ₹3,58,700 crore as of June-end 2023, against 2,96,487 crore as of June-end 2022, according to industry body Sa-Dhan.
The portfolio increased by over ₹7,000 crore in the first quarter of FY 2023-24.
The total disbursement of all lenders was up 30 per cent year-on-year at ₹76,274 crore during Q1 (April-June) of FY 23-24, whereas it was ₹58,809 crore in the same period of FY 22-23.
Bihar, Tamil Nadu, Uttar Pradesh, Karnataka, and West Bengal topped in disbursement during the April-June quarter of FY 2023-24, accounting for 59 per cent of the total. This is a 2 per cent increase from the last financial year.
All lenders, with the exception of not-for-profit (NFP) institutions, recorded positive portfolio growth in the first three months of the year, a report compiled by Sa-Dhan said.
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“For profit” lenders (small finance banks/ SFBs, non-banking finance companies/NBFCs, NBFC-Micro Finance Institutions/ MFIs) recorded significant y-o-y portfolio growth, with NBFC-MFIs recording 43 per cent growth, followed by SFBs and NBFCs at 24 per cent each. Banks’ portfolio growth was at 0.86 per cent.
However, the portfolio of NFP MFIs contracted by 64 per cent in the last year.
Sa-Dhan attributed the sharp drop in NFP portfolio to the shift of major NFP lender Cashpor Micro Credit (a section 8 company) to NBFC-MFIs, under the new regulatory framework for microfinance loans.
This framework prescribes Section 8 companies with portfolio above ₹100 crore opt for NBFC-MFI registration.
Jiji Mammen, ED & CEO Sa-Dhan, said: “The microfinance sector is continuing the growth story witnessed during the last financial year (FY).
“Although the first quarter is usually a dull one for the industry, microfinance continued to perform well, indicating a positive outlook for the year.”
Mammen underscored that disbursements stood at more than Rs 76,000 crore in the first quarter, which is 30 per cent more than disbursements done in the same period of the last FY.
The asset quality was excellent, with the numbers matching or bettering those in the pre-Covid period, he added.
Among the lenders, NBFC-MFIs have disbursed a maximum of ₹32,356 crore, closely followed by banks at ₹24,511 crore during April-June 2023.
Also, in terms of y-o-y growth, NBFC-MFIs registered the highest growth in disbursement (48 per cent), followed by SFBs (30 per cent), banks (16 per cent), and NBFCs (12 per cent). NFPs’ disbursements declined 32 per cent.
The number of loan accounts for the microfinance industry increased to 14.08 crore in Q1 of FY 23-24, from 12.65 crore in the same quarter of FY 22-23, posting 11 per cent y-o-y growth.
Lender-wise loan account growth showed that NBFC-MFIs registered the highest y-o-y growth (22 per cent), followed by NBFCs (15 per cent), SFBs (6 per cent), and banks (4 per cent). NFPs’ loan accounts declined 67 per cent.
Market share in terms of Portfolio
Market share of lenders in terms of portfolio shows NBFC-MFIs accounted for the largest share at 41.28 per cent, thus becoming the prime player in the microfinance sector.
Banks are the second largest provider of microcredit at 31.98 per cent. SFBs, NBFCs and NFPs accounted for 17.40 per cent, 9.06 per cent and 0.27 per cent of the market share, respectively.
NBFC-MFIs hold the highest portfolio market share from Q3 of FY 2022-23. The share of banks continued to dip as compared to the corresponding period last year.
“The share of portfolio indicates that the NBFC-MFIs have become more pro-active in their approach, taking the benefit of RBI’s new regulatory framework and the positive mood in the country towards MFIs.
“Lenders and investors have started taking a special interest in the sector, which will augur well in expanding financial inclusion quickly,” Mammen said.
However, there are some local issues in different geographies, including an organised move by some to mislead vulnerable people, he added.
“The law enforcing agencies should keep a constant vigil against such unscrupulous elements, who can destroy the credit culture in the country,” said Mammen.
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