As banks shrink microfinance books, bigger MFIs prepare to grab the gap
Kolkata: Large microfinance companies have drawn up plans to grow faster this year, revising their earlier projections upwards, as cautious lending by private banks and
Kolkata: Large microfinance companies have drawn up plans to grow faster this year, revising their earlier projections upwards, as cautious lending by private banks and smaller lenders create more space for them.Publicly listed Muthoot Microfin and Satin Creditcare Network -- the third and fourth in ranking in terms of assets under management -- have both raised growth projections by around 500 basis points, with the microfinance market getting more consolidated in favour of large non-banking financial companies-microfinance institutions (NBFC-MFIs)."Since banks including small finance banks are downsizing their microfinance portfolio, we are witnessing a higher demand," Satin Creditcare Network chairman HP Singh said.Cumulative microfinance portfolio of private banks shrank about 12% in the first quarter of the fiscal to Rs 79023 crore at the end of June from Rs 89548 crore three months prior, Equifax India data showed.
The cumulative microfinance portfolio of small finance banks also contracted to Rs 48759 crore from Rs 50725 crore over the same period.133073956Meanwhile, several smaller NBFC-MFIs have either stopped or scaled down operation in the absence of institutional support, people aware said.Muthoot has revised the advance growth guidance to 20% from a previous projection of 12-15% while Satin revised it to 20-25% from 15-20% earlier. The country's largest NBFC-MFI CreditAccess Grameen is also chasing a 20-25% growth."The smaller MFIs are shrinking in the absence of liberal bank funding which is an essential raw material.
This gap can be filled by larger, well capitalised firms," Muthoot Microfin chief executive officer Sadaf Sayeed said.The renewed stability in the microfinance sector also brings comfort to the bigger MFIs. The sector has shown sequential improvement in asset quality for the past few quarters with the implementation of stricter lending guardrails.Till December last year, the sector's gross portfolio continued to shrink from the record peak of Rs 4.43 lakh crore seen
as on end-March 2024 as lenders followed risk-off strategy as overleveraged borrowers defaulted en masse. The March quarter saw a rebound but the concerns over irregular rainfall amid a traditionally weak first quarter led to a dip again overall.CreditAccess Grameen managing director Ganesh Narayanan said that the firm may likely to remain within the projected growth range with respect to growth, while expecting higher growth in the typically business third and fourth quarter.
The BriefWire