Payments on MFI-securitised paper on track, says Crisil

Microfinance institutions (MFIs) are making regular payments to investors who had invested in debt instruments floated by them while securitising loans. This is despite the turbulence faced by the sector in recent months, according to rating agency Crisil.

The performance of Crisil-rated securitisation transactions originated by MFIs remained strong. In seven of the nine outstanding transactions, more than 50 per cent of the senior investor payouts had already been made, the ratings agency said.

The investor payouts in three of these transactions are fully covered by cash collateral. Also, the available cash collateral has not been utilised in any of the MFI pools so far.

Raman Uberoi, senior director at Crisil, said ratings securitisation transactions, which were appropriately conceptualised and structured, could benefit issuers and investors alike even during turbulent times.

The structuring of securitistion deals, along with credit enhancement, is robust and the strong collection efficiencies in regions other than Andhra Pradesh are supporting prompt payments. This allows transactions to withstand temporary weaknesses in collection performance without impacting the credit quality of investor payouts.

Crisil said it continued to closely monitor the structural performance and collections of the MFI pools and would take appropriate rating actions when necessary.

Seven of the nine outstanding transactions do not have exposure in Andhra Pradesh and maintain robust collection performance — they have a collection efficiency of more than 99 per cent and negligible delinquency levels.

The two transactions that have exposure in Andhra have also maintained stable overall pool performances, primarily backed by strong collections from other states, although their collections in Andhra Pradesh have been weak.

Also, adding to the strong credit profiles of these transactions are robust structural features that allow principal payments to be deferred or advanced to match the actual collection behaviour.