Microfinance institutions pain on the rise: Explained in four charts

Microfinance institutions (MFI) may have to brace for more pain going ahead. Delinquencies in Q3FY20 were higher than the previous quarter. The portfolio-at-risk (PAR) in the 1-30 due-past-date (DPD) period rose by 60 basis points (bps) to 1.9 per cent over the previous quarter; PAR in the 31-180 DPD rose by 40 bps to 1.5 per cent; while PAR 180+ DPD fell by 10 bps to 4.4 per cent. The overall write-offs in this period stood at 1.4 per cent of the portfolio, 10 bps higher than the previous quarter. What is surprising is banks’ exposure to the MFI sector which had been at the least risk in the previous quarter. The narrative has changed and there was a sharp uptick in PAR across rural and urban geographies – in the DPD 1-30 bucket, it was up by 174 bps and by 96 bps in rural and urban areas.

CRIF’s report on the sector – MicroLend – says the North East which has the smallest share of MFI loans at 7 per cent saw considerably high early repayment stress in Q3FY20, at 10.3 per cent compared to all-India figure of 1.9 per cent. Assam saw 16.1 per cent of its MFI portfolio under early repayment stress.