Microfinance sector stares at sequentially challenging year: India Ratings

Collections in May could see shortfall of 10-15%; credit costs may escalate in FY22

The microfinance sector is expected to see a shortfall of 10-15 per cent in collections on a consolidated basis in May 2021 due to the effect of lockdowns imposed to contain the Covid-19 pandemic.

The variation among Micro-finance institutions (MFIs) could be wider, depending on their level of concentration in regions where lifting of restrictions could be slow, according to India Ratings (Ind-Ra).

The Micro-finance institutions (MFIs) could again see credit costs in the range of 3-6 per cent in FY22, if the early trends of the collection performance were to persist.

Ind-Ra, in “microfinance outlook” had estimated credit costs for MFIs to