Microfinance portfolio grew 84% in FY15

Microfinance firms were able to increase their portfolio substantially, even as one of the biggest micro-lender Bandhan was elevated to a bank

Higher size loans and buoyed bank funding helped microfinance institutions (MFIs) to increase their gross loan portfolio by 84 per cent in 2015-16 to Rs 53,233 crore, against Rs 28940 crore in FY15, according to data from Micrometer, a quarterly report on sectoral performance.

Notably, this portfolio expansion happened even as one of the biggest micro lenders, Bandhan, was elevated to a bank. Bandhan used to account for almost a fifth of the MFI portfolio.

About 60 per cent of the loan portfolio of MFIs was concentrated in urban and semi-urban areas in FY16.  

Five MFIs, all to convert into Small Finance Banks, were among the top 10 lenders in terms of gross loan portfolio last year. These were Janalakshmi, Ujjivan, Equitas, ESAF and Utkarsh.  All of them aggressively grew their portfolio in the past year.

Janalakshmi emerged as the biggest MFI in terms of loan portfolio last year, at Rs  10,983 crore, up 194 per cent over a year before.

“Two major factors led to the growth in portfolio. First, there was a 45 per cent increase in borrower base. Second, the Reserve Bank increasing the (permitted) size of micro loans helped the industry,” said Ratna Vishwanathan, chief executive of Microfinance Institutions Network (MFIN).

After the RBI regulation which increased the lending limit for MFIs from Rs 50,000 to Rs 100,000 per borrower in April 2015, the average loan amount disbursed per account last year was Rs 17,805, against Rs 14,731 in FY15. The number of MFI clients increased from 22.6 million in FY15 to 32.5 mn in FY16.

Debt funding to MFIs increased by nearly 55 per cent, with banks and finance institutions lending Rs 33,706 crore in FY15-16.  The average cost of funds for MFIs as on this March was around 14.8 per cent.

"There has been a return of confidence in the microfinance sector, and as a results, banks are now coming forward to lend. Hence, there is enough flow of fund," said Manoj Kumar Nambiar, managing director, Arohan Financial Services and president of MFIN.

Southern India still accounts for a major 35% of the loan portfolio, followed by western and northern region, which each accounts for 25% of the portfolio. Interestingly, with the exit of Bandhan from MFIs, the share of eastern India’s portfolio reduced to 19%. In FY14-15, east accounted for nearly 28% of the MFI portfolio.