Rural microfinance: Loans disbursed witness degrowth by value, volume in FY21, says report

Credit and Finance for MSMEs: Loan performance deteriorated with a sharp increase in 91-180 Days Past Due (DPD) in microfinance (0.7 per cent to 3.2 per cent) and retail loans (2.2 per cent to 3.5 per cent) from June 2020 to June 2021.

“This deterioration is attributable to the Covid pandemic and the resulting lockdown leading to liquidity crunch in the market,” the survey said. (Image: pixabay)

Credit and Finance for MSMEs: Rural microfinance loans, which constitute 58 per cent of the overall microfinance credit market in India, dipped by value and volume in FY21. While degrowth of 9 per cent was witnessed in loans disbursed by value, the volume also declined by 19 per cent amid pandemic, according to CRIF and CII Rural Business Confidence Index October 2021. Total microfinance disbursements in rural India in FY20 stood at 4.26 crore loans amounting to Rs 1.44 lakh crore in comparison to 3.2 crore loans involving Rs 1.12 lakh crore in FY21. During the first quarter of FY22, 41.1 lakh loans amounting to Rs 14,700 crore. The average ticket size for microfinance loans was Rs 35,000. 

Even as the microfinance expansion in rural India was impacted, the gross loan portfolio (GLP) of the sector across India grew 5.75 per cent year-on-year (YoY) as of September 2021 while Q2 (July-September) growth stood at 2.1 per cent from Q1 in the current FY, a report by Crif MicroLend in December had showed. The portfolio outstanding had jumped from Rs 235.4k crore as of September last year and Rs 243.8k crore as of June 2021 to Rs 249k crore as of September 2021. The microfinance sector provides entrepreneurs, small businesses, and individuals access to formal financial services. 

In terms of delinquencies, loan performance in rural microfinance deteriorated with a sharp increase in 91-180 Days Past Due (DPD) in microfinance (0.7 per cent to 3.2 per cent) and retail loans (2.2 per cent to 3.5 per cent) from June 2020 to June 2021. Likewise, over 180 DPD saw a steep increase across retail (7.5 per cent to 8.7 per cent), microfinance (3.5 per cent to 6.4 per cent) and commercial loans (4.3 per cent to 5 per cent) from June 2020 to June 2021. “This deterioration is attributable to the Covid pandemic and the resulting lockdown leading to liquidity crunch in the market,” the latest survey noted. 

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“In India, two-thirds of the workforce live in rural areas, and the rural economy contributes to almost 46 per cent of our national income. Undoubtedly, it is the backbone of India’s economic progress. The epidemic has brought about a significant structural shift in the country and rural India displayed exemplary resilience during this phase. With the next few years being critical for the country’s continued economic growth, it is imperative to have a holistic mechanism that can evaluate and forecast rural business sentiment. Therefore, Confederation of Indian Industry (CII) and CRIF jointly developed the RBC Index,” said Navin Chandani, MD & CEO, CRIF High Mark in a statement.  

The survey was conducted in September and October 2021 by CII among their members operating in rural locations. 48 per cent respondents were large enterprises, 14 per cent were medium businesses, 19 per cent were small enterprises, and 18 per cent were micro units by turnover.

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