The growth in the microfinance sector may get hampered in the short term due to the present problems in the non-banking finance space, Managing Director and CEO of Bandhan Bank C S Ghosh said on Tuesday.
Ghosh also suggested that microfinance institutions (MFIs) should be cautious in expansion in the present market scenario.
“In the present scenario, MFIs need to be cautious in lending. There might be some slowdown in the growth in the near term,” Ghosh told reporters.
Ever since the IL&FS crisis broke out, growth in the microfinance sector has been constrained due to lack of capital. Banks have stared becoming selective in lending and non-banking finance companies (NBFCs) face liquidity squeeze following the IL&FS crisis.
While bigger Micro Finance Institutions (MFIs) depend on banks and money market to raise funds, mid and smaller MFIs depend on non-banking finance companies.