Credit is always in demand and in past few years we have witnessed this demand from the micro segment. as a result the microfinance industry has recorded a 26 per cent growth in gross loan portfolio in 2016-17 with Rs 106,916 crore in outstanding loans, according to data compiled by industry body Microfinance Institutions Network (MFIN).
The growth rates are lower than industry expectations for a sector that depends on cash and is recovering from the impact of demonetization. The industry had recorded a gross loan outstanding of Rs 84,717 crore in 2015-16.
The gross loan portfolio in the data represents 90 per cent of the total industry, excluding self-help groups but including banks, NBFCs (non banking finance institutions), NBFC MFIs and non-profit MFIs.
The share of NBFC-MFIs was the highest, representing 42 per cent of microfinance lending, followed by banks at 38 per cent and small finance banks at 14 per cent. The mix, however, is expected to change as more NBFC-MFIs are expected to convert to small finance banks this financial year.
For NBFC MFIs, two key operational parameters reflect the impact of demonetization. First, the portfolio at risk (PAR 30) has increased from 0.4 per cent in 2015-16 to 14.1 per cent in 2016-17 as cash recoveries were impacted because of non-availability of adequate currency notes.
Second, the average loan amount disbursed per account has reduced to Rs 17,779 in 2016-17 from Rs 17,812 in 2015-16 as the lenders became more cautious about offering more credit to borrowers.
But according to MFIN, constrains in recovery because of inadequate cash are showing signs of change. “As liquidity has come back, certain troublesome geographies have started easing out and we hope to see better growth figures for the next quarters,” said Ratna Vishwanathan, CEO of MFIN.
In terms of regional distribution of gross loan portfolio of NBFC-MFIs, south India accounted for 31 per cent, north India 27 per cent, the west 24 per cent and the east accounted for 18 per cent.
Karnataka, Tamil Nadu, Uttar Pradesh, Maharashtra and Madhya Pradesh accounted for 56 per cent of the gross loan portfolio.