Microfinance loans grow 24% YoY in Q1 of FY23; credit quality stable

The loan portfolio of micro-finance institutions (MFI) increased 24 per cent year-on-year (YoY) to Rs 2.75 trillion by end of this June from Rs 2.22 trillion a year ago.

Sequentially, the loan book expanded from Rs 2.62 trillion at end of March 2022 (Q4Fy22), according to Sa-Dhan, the self-regulatory organisation (SRO) for microfinance.

Jiji Mammen, chief executive officer of Sa-Dhan, said the sector is on track after overcoming the impact of the coronavirus. Although it was busy in implementing the Reserve Bank of India’s regulations during Q1, it has clocked a healthy growth.

Fund flow to the sector has improved but some smaller MFIs still find it difficult to access finance from banks. The organisation is working towards removing this gap, Sa-Dhan said in a statement.

Barring banks, portfolio of other micro-finance lenders recorded double digit growth. Non-banking finance companies working as MFIs recorded growth of 35.18 per cent. The small Finance Banks clocked 27.66 per cent YoY growth.

Disbursements more than doubled to Rs 57,842 in April-June 2022 (Q1Fy23) from Rs 27,328 crore during the same quarter of last year. However, disbursement is down around 35 per cent compared to the previous quarter (Q4Fy22) as lenders were fine tuning their disbursement policy as per the new regulations, Sa-Dhan said.

Loan recovery has improved compared to the previous quarter and reached almost 99 per cent in some states. However, there are still certain geographies where collection is below the normal. For example, the collection efficiency in Assam stood at 50-55 per cent.

Sectoral non-performing assets was at around 12 per cent at the end of June 2022, and for NBFC-MFIs it was 9 per cent.