Collections near normal level, but smaller MFIs still facing liquidity crunch, says CreditAccess Grameen MD

Hebbar said smaller MFIs with a portfolio of less than Rs 500 crore find it difficult to acquire funds because of their dependency on borrowing largely from non-banking finance companies (NBFCs) and other informal sources. Mainstream banks not extending credit is an issue.

As per a report released by the Microfinance Institution Network on Friday, aggregate collections are nearing 90% and disbursements are also closer to pre-Covid-19 levels.
As per a report released by the Microfinance Institution Network on Friday, aggregate collections are nearing 90% and disbursements are also closer to pre-Covid-19 levels.

By Piyush Shukla

Though collections and disbursements have reached near normal levels for the microfinance industry, smaller microfinance institutions (MFIs) are facing challenges in accessing funds at a cheaper cost due to lower credit ratings, according to Udaya Kumar Hebbar, managing director and chief executive officer of CreditAccess Grameen.

Hebbar said smaller MFIs with a portfolio of less than Rs 500 crore find it difficult to acquire funds because of their dependency on borrowing largely from non-banking finance companies (NBFCs) and other informal sources. Mainstream banks not extending credit is an issue.

He said the government’s credit guarantee scheme and measures taken by the Reserve Bank of India (RBI) to extend credit via targeted long term repo operations may result in liquidity for smaller microfinance lenders going ahead. Further, revised regulations for MFIs that are yet to be implemented by the RBI may address the liquidity issues.

As per a recent report by Small Industries Development Bank of India (SIDBI) and Equifax India, the outstanding portfolio of the microfinance industry stood at `2,22,060 crore at the end of June with banks and NBFC-MFIs contributing more than 75%. Portfolio outstanding decreased by 11% by June-end from March.

Hebbar said CreditAccess Grameen’s collection efficiency for October was 94.3%. “Over 4.2% of the customers are not paying up, which means that collections are close to 98% … We are near normal in terms of collection, near normal or better than normal in terms of disbursements and expansion and new customer acquisition. I agree that a fresh Covid wave can create some impediment in between, but I think with experience we will face that,” he told FE.

As per a report released by the Microfinance Institution Network on Friday, aggregate collections are nearing 90% and disbursements are also closer to pre-Covid-19 levels.

Further, the microfinance industry outlook remains stable despite concerns over the new Omicron variant of Covid-19 spreading across the globe, Hebbar said. He said the industry witnessed relatively lower fluctuation in terms of credit cost during the second wave, which was dominated by the Delta variant.

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