MFI Loan Disbursements At Over Two-Year Low In Q3, Says Industry Body

Loan disbursements by microfinance institutions hit over a two-year low in the December quarter at Rs 220.9 crore, 36% lower than the year-ago period.

The number of new loans disbursed has declined 29%, according to the 52nd edition of Micrometer, a publication of the Microfinance Industry Network, that was released on Tuesday.

The report comes at a time the microfinance institution space is facing challenges as they have to curb their loan growth due to overleveraging of borrowers. The average loan amount disbursed per account during the December quarter was Rs 51,691, higher by over 15% year-on-year.

The MFIN is an industry association of banks, non-banking financial companies, MFIs and small finance banks providing microfinance and an RBI-recognised self-regulatory organisation.

The portfolio at risk over 30 days deteriorated to 8.8% as of Dec. 31 against 3.5% a year ago. The PAR means days past due that shows the proportion of outstanding loans that are considered significantly delinquent and potentially at risk of defaulting.

Asset under management of the MFIs was Rs 1.42 lakh crore as of Dec. 31. It was lower by 0.1% a year ago and by 6.5% a quarter ago. Due to the ongoing stress in the sector, the NBFC-MFIs received a total of Rs 12,921 crore in debt funding in the October–December period, down 40% year on year.

While banks contributed 79% of the total borrowing, the NBFCs accounted for nearly 9%, followed by external commercial borrowing at 8% and all India financial institutions at 4.3%

In terms of geographical coverage, east, northeast and south comprise 63% of the total microfinance portfolio. Portfolio quality as measured by PAR 31–180 was 6% as compared to 2% a year ago, the report said.

This has come as the MFIN had imposed in July a cap of four microfinance lenders serving one borrower. It had also restricted the total microfinance loans to a client to Rs 2 lakh.