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ICICI Securities Report
The microfinance industry demonstrated commendable resiliency during the throes of the Covid-19 pandemic – none of the lenders reported full-year losses between FY21–23.
However, aggressive growth, revised MFI regulation (removal of three-lender cap and FOIR-based lending) and increased competition post covid (as per our recent channel checks, more than 20 players entered Gujarat in the last year; such is the case in north and west India too) led to customer-level over-leverage.
The share of more than 100K ticket-size borrowers grew to 4.5% by March 2024, from 2.1% in Mar-23. Similarly, borrowers with more than four lenders touched a peak of 8.4% in Q2 FY24, from 4% in March-22, derailing collection momentum since Sep-23; June-24 was the worst hit in terms of collections.
We believe, collection shall remain sluggish in Q2 FY25 as well and would lead to elevated credit cost in near-term. Prefer CreditAccess Grameen, Utkarsh SFB and Spandana within MFI space.
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