Even if the one-time hub of micro finance in the country, Andhra Pradesh (AP), continues to see a slump in business, emerging centres have begun to breathe fresh life into the sector.
Compared with a 15% fall in the industry?s gross loan portfolio (GLP) to R15,433 crore in 2011-12, the first nine months of this fiscal saw the GLP outstanding shoring up to R18,639 crore. This growth was led by states like Tamil Nadu, West Bengal, Karnataka and Bihar, as lenders have more or less stopped lending in AP. Micro lending in AP, which was hit by a stringent state government ordinance in October 2010, has since shrunk from about 45% of the GLP to 23% as of December 2012. West Bengal now has the largest number of MFI branches in the country and Tamil Nadu the largest presence of MFIs.
During the December quarter, MFIs lent out R6,194 crore, of which MFIs based outside AP contributed to around 70% of disbursements. The remaining 30% was disbursed by AP-based MFIs, but mainly to borrowers outside of the state.
Microfinance major SKS recently reported a R1.2-crore profit in the December quarter after remaining in the red for the previous seven quarters. This was thanks largely to its non-AP business, as it has written off its entire AP portfolio, standing at R1,491 crore of loans.
Alok Prasad, CEO of industry body micro finance institutions network (MFIN), said the trend towards MFIs expanding to other states has accelerated after the AP crisis. ?The repayment rate for loans in these regions stands at around 99%,? he said.
Samit Ghosh, CEO of Ujjivan Financial Services, said over the past one year, MFIs have been able to lend more in newer geographies, thanks to renewed confidence by banks to lend to the sector. Banks are the primary sources of funding for MFIs. ?The recent RBI regulations and the proposed MFI bill have instilled confidence in the sector. We are seeing strong loan growth in states such as Punjab, UP and Haryana,? said Ghosh.
The RBI has created a separate category of NBFC-MFIs that have to make full provisioning for loan assets due for more than 180 days, spread over five years. The RBI also stipulated a margin of 10% for large MFIs and 12% for smaller MFIs. On the other hand, the government is formulating a national regulation known as Microfinance Institutions (Development and Regulation) Bill, 2012.
However, the going is still tough for AP-based microlenders who are having their debts restructured in the CDR cell. Banks are reluctant to lend to them. In the case of Spandana Sphoorty Financial, the non-AP portfolio has remained at around R1,000 crore over the past one-and-a-half year, while it has fully provided for its R1,450-crore AP exposure. Nitin Agarwal, senior VP (strategy), said, ?We are talking to banks to raise a R200 per quarter loan facility. We have recently entered Kerala and UP and need funds to grow.?
