Microfinance industry back on growth path: Report

After going through a crisis period, the country's microfinance industry has returned to the growth phase, especially in the light of stable regulatory framework, says a report.
With the industry seeing better growth prospects, companies like SKS Microfinace are expected to benefit, Karvy Stock Broking said in a report today.
The microfinance industry in India has returned to growth phase in terms of gross loan portfolio value on the back of a stable net interest margin of over 10 per cent, total number of borrowers, branch network in the light of stable regulatory framework after going through a crisis in last few years, it added.

"SKS Microfinace is expected to benefit from the rebound in the microfinance sector's growth in the light of regulatory clarity post the AP MFI crisis," the report said.
It added that the company's well diversified presence, credit rating, strengthened balance sheet, track record in handling crisis, efforts to get small finance banking licence augurs well in the long term.
The microfinance industry in India had witnessed phenomenal growth from the year 2000 till the crisis in Andhra Pradesh during 2010.

The microfinance industry has recorded a growth of 55 per cent in new loan disbursements to Rs 54,591 crore which resulted in 61 per cent growth in total Gross Loan Portfolio to Rs 40,138 crore during FY15, the report said.

Going forward, it says, the Indian microfinance sector is likely to present huge opportunities along with the challenges of the same degree, making it among the high risk-high reward businesses.
"In a stable regulatory environment, the sector is expected to witness huge growth opportunities in terms of volume growth in addressable rural households with income up to Rs 1,00,000 and in non-rural with income up to Rs 1,60,000."
It said value growth would come in the form of bigger ticket loans of up to Rs 60,000 for first loan cycle and up to Rs 1,00,000 in the subsequent cycle as well as increase in indebtedness up to Rs 1,00,000.

"It also provides opportunities for loans in income and non-income generating activities," it said.
"In our view, SKS Microfinace, the only listed microfinance company is likely to benefit from the stable regulatory environment along with its application for small finance bank it is on the right track of sustainable long term growth," it added.