- CreditAccess Grameen saw 28% y-o-y and 44% q-o-q disbursement growth in Q4FY26
- Overdue loans reduced with PAR-30 at 2.7% and PAR-90 at 2.3% in Q4FY26
- FY27 guidance includes 20-25% asset growth and 12.8%-13.2% net interest margin
The microfinance industry has surpassed another adverse credit cycle, with improvement in disbursements, margins and asset quality, according to Q4FY26 earnings.
Micro-finance institutions (MFIs), in fact, have shared aggressive guidance for FY27 after seeing two fiscals of heightened delinquencies due to overleveraging of borrowers.
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Q4 numbers
Country's largest MFI CreditAccess Grameen reported 28% year-on-year (y-o-y) and 44% quarter-on-quarter (q-o-q) growth in disbursements at Rs 8,313 crore in Q4. Portfolio at risk (PAR), which reflects overdue loans, reduced across buckets.
Over 30-days overdue loans reduced to 2.7% in Q4 from 3.8% in Q3 and 5.5% last fiscal, over 60-days overdue loans reduced to 2.5% in Q4 from 3.4% in Q3, while PAR-90 or non-performing loans reduced to 2.3% in Q4 from 3.3% last fiscal.
For FY27, the MFI has guided 20-25% asset growth, 12.8%-13.2% net interest margin (vs 13.4% in FY26), 3-4% credit cost, and 4-4.8% return on assets. Other MFIs including Muthoot Microfin, Satin CreditCare and fusion finance have also reported similar improvements on key metrics in Q4 and guided for better financials in FY27.
What worked?
Ganesh Narayanan, MD & CEO, at CA Grameen said, “The past two years were genuinely difficult, and we took structured steps to navigate through the challenging environment with discipline and intentionality. We prioritized collections first, then portfolio maintenance and only then growth. We stabilized our force through continuous training, the leaders at the forefront approach and extensive hiring,”.
He said the MFI increased internal audit frequency from 60 days to 40 days, supported by real-time analytics. Senior leadership travelled extensively to provide ongoing direction and “moral support”, he added.
Further, the MFI sector adopted new rules issued by self-regulatory bodies which helped in business recovery. These rules bar lending to borrowers with over 3 active loans, households with over Rs 2 lakh indebtedness, among others. With these changes, the MFI sector appears to be out of the woods. At least until the next adverse credit cycle starts.
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