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Microfinance institutions (MFIs) have now become the favourites for banks and financial institutions when it comes to lending. As per data available with Micro Finance Institutions Network (MFIN), a body of Non-Banking Finance Company-MFIs, micro lenders received a total of ₹10,237 crore in debt funding from banks and other financial institutions during the first quarter of financial year 2018-19. “There had been a lull in bank financing to micro lenders till a couple of years back. It has started picking up for the last two years and has gained momentum now,” a top executive with a listed MFI told BusinessLine.
The growth in debt-funding from banks to MFIs during the first quarter has gone up by 160 per cent compared to the year-ago period.
In the first quarter of FY18, the growth in debt funding was only 20 per cent compared to the previous year.
While small and medium MFIs sourced their debt funds from financial institutions other than banks, large MFIs have been able to source a significant portion of their funding from banks.
Total asset base
As on June 2018, NBFC-MFIs had a total asset base of ₹53,181 crore with outstanding borrowings at ₹39,241 crore. The year-on-year growth of borrowings is 70 per cent and total assets is at 41 per cent.
Total equity of the industry stands at ₹10,366 crore, which is 24 per cent of the total owned portfolio. At an aggregated industry level, domestic equity is 52 per cent of total equity.
In addition to debt funding, the general investor perception on MFIs has been improving as indicated by the success of the initial public offer of Bengaluru-based CreditAccess Grameen last month with a total size of about ₹1,130 crore. “We have 19 anchor investors with varied participation. We are the highest-rated pure-play institution and will now attract more of debt investors,” its Chief Financial Officer, BR Diwakar, told BusinessLine .
At an industry level, the average and median cost of funds are at 14.5 per cent. Overall spread of cost of funds ranges from 8 per cent to 17 per cent.
For large MFIs, the range is between 9.8 per cent and 15.3 per cent, while for medium micro lenders, it is 14.5 per cent and 15.7 per cent. In the case of small MFIs, it is between 8-16.8 per cent.
The speedy growth in loan portfolio and repayment of up to over 98 per cent is driving better funding to micro-lenders. The aggregate gross loan portfolio of MFIs is ₹51,878 crore as on June 30, 2018, representing a year-on-year growth of 53 per cent.
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