MFIs report 15% contraction in loan book

Microfinance institutions (MFIs) that work outside Andhra Pradesh have registered a growth in loan disbursement, while their counterparts focusing on the state have posted a decline.

Problems associated with recovery in Andhra Pradesh have hit the countrywide loan portfolios of microfinance institutions, shrinking the books by 15 per cent to Rs 15,443 crore in 2011-12, according to the Microfinance Institutions Network (MFIN).

The picture outside Andhra Pradesh was different. Showing signs of growing out of a rough patch, loan books of such MFIs grew 22 per cent to Rs 8,383 crore in 2011-12, MFIN said.

The network is a self-regulatory body that has 45 members, covering 90 per cent of the Indian microfinance industry.

These entities are non-banking finance companies working in the microfinance sector. MFIN on Friday released the first edition of its quarterly report — MicroMeter. The report aims to capture key trends in the microfinance sector.

Alok Prasad, chief executive of MFIN, said the data signals a positive outlook for NBFC-MFIs.

While pan–India indicators present a negative picture of the state of the industry, a closer look at the data reveals promising trends.

For MFIs operating in Andhra Pradesh, the loan portfolio declined 38 per cent to Rs 7,060 crore at the end of March 2012, from Rs 11,314 crore at the end of March 2011.

Investor confidence has grown with asset sales transactions doubling to Rs 3,000 crore in the last financial year. Repayment rates at 99 per cent levels outside Andhra Pradesh is the strongest sign of the inherent strength of the industry.

H Siddhartha Chowdri, country manager, Accion Technical Advisors, said growth is definitely happening in the sector. But it is concentrated in a few large institutions.

Bank funding to the sector has begun. It has not picked up the way the industry had hoped, after the Reserve Bank of India prescribed regulatory norms to bring discipline, Chowdri said. MFIN said the borrower base is 22 million and loan disbursements exceeded Rs 20,000 crore.

The sector continues to serve the credit needs of a vast pool of unbanked and under-served population.

Investments into the sector are also looking up after Accion, a global non-profit entity working in microfinance field, recently invested in two MFIs, Swadhar Microfinance in Mumbai and Saija Finance in Patna.