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Microfinance sector clocks 5% Q4 FY22 growth from year-ago period: Report

Credit and Finance for MSMEs: There was an improvement in the portfolio quality as well for all lenders under almost all buckets as of March 31, 2022.

There was also a significant YoY increase in average ticket size. (Image: pexels)

Credit and Finance for MSMEs: The country’s microfinance sector showed signs of recovery during the fourth quarter of the financial year 2021-22 after the pandemic with over 13 per cent portfolio growth among lenders from the previous quarter and around 5 per cent year-on-year (YoY) growth, indicating field activities coming back to near normalcy, said a report by the Reserve Bank of India (RBI)-recognised self-regulatory organisation (SRO) for microfinance institutions (MFIs) Sa-Dhan. The association has 215 members.

Non-banking financial company (NBFC)-MFIs had registered growth of 19 per cent to Rs 94,096 crore in their portfolio while not-for-profit MFIs (NFPs) showed 30 per cent growth to Rs 2,745 crore during Q4 from the year-ago quarter. However, banks’ portfolio had dipped 7 per cent to Rs 1.02 lakh crore.

YoY disbursements were also up for all lenders during Q4 except banks which saw a decline to Rs 35,773 crore in Q4 FY22 from Rs 46,911 crore in Q4 FY21. NBFC-MFIs’ disbursements jumped to Rs 30,216 crore in Q4 FY22 from Rs 27,364 crore in Q4 FY21 while for SFBs, disbursements were up from Rs 11,926 crore in Q4 FY21 to Rs 13,316 crore in Q4 FY22. Disbursements for NBFCs and NFPs had also increased to Rs 5,389 crore and Rs 970 crore during Q4 FY22 from Rs 4,899 crore and Rs 858 crore during Q4 FY21 respectively.

“The sector is around the pre-Covid level of disbursements. We had expected things to normalise from the third quarter onwards. In this recovery scenario, 5 per cent portfolio growth is also significant as the first quarter was almost washed out due to Covid,” P Satish, Executive Director, Sa-Dhan told Financial Express Online. 

In the YoY comparison, there was also a significant increase in average ticket size (ATS). For small finance banks, the ATS increased from Rs 37,071 to Rs 45,066 while for NBFCs, the ATS increased from Rs 40,085 to Rs 45,016. For NBFC-MFIs, the ATS increased from Rs 35,266 to Rs 38,647. On the other hand, there was a decline in ATS for banks from Rs 41,777 to Rs 39,534 and for NFPs as well from Rs 30,175 to Rs 26,574, the report noted.

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Importantly, there was an improvement in the portfolio quality as well for all lenders under almost all buckets as of March 31, 2022. The Portfolio At Risk (PAR) for loans overdue by more than 30 days improved to 5.27 per cent in Q4 from 8.77 per cent in Q3. Likewise, PAR 60+ improved to 3.55 per cent from 5.64 per cent and PAR 90+ improved to 2.43 per cent from 3.48 per cent in Q3. PAR 180+ also showed improvement to 9.40 per cent from 9.60 per cent.

“This is an indication that livelihood of microfinance beneficiaries is slowly getting back on track with resuming of their work operations,” added Satish. Overall, collection efficiency also improved to 95-99 per cent however the recovery wasn’t uniform across the states and union territories, according to the report.

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