Microfinance institutions (MFIs), which bounced back in FY13 after two years of afflictions following regulatory flip-flop, have gained growth momentum in the current fiscal with fresh disbursals shooting up 56 per cent, according to data collated by industry body MFIN.
The microlenders disbursed Rs 6,503 crore in the first quarter of the current financial year compared with Rs 4,157 crore in the same quarter last year. The total outstanding gross loan portfolio (GLP) stood at Rs 21,332 crore as of June 30, 2013, up 17 per cent over the year-ago period, according to MFIN MicroMeter. MFIs with GLP between Rs 100 and Rs 500 crore reported the highest growth, almost doubling their loan books.
The analysis is based on data collected from 42 MFIs on an aggregated basis, constituting around 85 per cent of the microfinance business in the country excluding self-help groups.
The MFI space took a hit in 2010 due to a new state law in Andhra Pradesh putting severe restrictions on the operations of microfinance firms after complaints that they were adopting coercive loan recovery practices and charging exorbitant interest rates. The data asserts the growth slowly gaining its sheen back.
The industry’s performance continued to improve in Q1FY14 and lending in states such as West Bengal, Tamil Nadu, Kerala, Bihar, Assam and Uttar Pradesh reflected high growth.
Madhya Pradesh has joined Tamil Nadu as top state with largest number of MFIs. The top five states now account for 59 per cent of the portfolio.
Andhra Pradesh remains the top state in terms of GLP, as significant non-performing portfolios continue to stay on the balance sheet of MFIs.
Six MFIs—Asmitha Microfin Ltd, Bhartiya Samruddhi Finance Ltd, Future Financial Services Ltd, Share Microfin Ltd, Spandana Sphoorty Financial Ltd and Trident Microfin Pvt Ltd—that went into Corporate Debt Restructuring (CDR) saw their books growing by a mere 11 per cent. These MFIs continue to see reduction in their client base by 19 per cent year on year.
However, the report also noted that the GLP growth was fairly
broad-based, with 70 per cent of MFIs showing an increase in GLP over Q1FY13 despite the continued drop in branch network and staff strength of MFIs directly contributed by CDR MFIs and a few smaller MFIs.
Top MFIs to look out for
There are a few MFIs that managed to buck the slowdown and have emerged as star performers in the reporting quarter. These top MFIs are outliers and have seen their GLP grow many times the industry average partly because of the low base. The firms in less than Rs 100 crore portfolio category lead the pack with Saija Finance Pvt Ltd recording 341 per cent growth followed by Annapurna Microfinance Pvt Ltd (258 per cent), Disha Microfin Pvt Ltd (116 per cent), Chaitanya India Fin Credit Pvt Ltd (92 per cent) and SV Creditline Pvt Ltd (84 per cent).
Top large MFIs with GLP of more than Rs 100 crore include Janalakshmi Financial Services Ltd (167 per cent), Utkarsh Micro Finance Pvt Ltd (134 per cent), Arohan Financial Services Ltd (120 per cent), Satin Creditcare Network Ltd (102 per cent) and Sonata Finance Pvt Ltd.
Equity vs debt
As of June 30, 2013, MFIs had Rs 1,855 crore in equity. Although private investors have become cautious about their investments in this space, firms such as Aavishkaar Goodwell, IFC, Norwegian Microfinance Initiative, US-based Creation Investments Capital Management, Incofin
Investment Management and MicroVest Capital, Equator Capital Partners, Danish Microfinance Partners K/S and Dia Vikas Capital have committed fresh capital in MFIs in the last several months.
MFIs under CDR saw their equity decline over Q4 FY13 by 20 per cent due to write-offs in Andhra Pradesh. However, the other MFIs increased their equity over Q4 FY13 by 3 per cent.
On the debt side, MFIs received total debt funding of Rs 998 crore, 79 per cent from banks and rest from other financial institutions (FIs), while smaller and medium MFIs got more than 60 per cent of their funding from FIs; large MFIs received 91 per cent funding from banks.
(Edited by Joby Puthuparampil Johnson)