Microfinance institutions (MFIs) regained their lost sheen by posting 13 per cent growth in total disbursals to Rs 23,209 crore during the year ended March 31, 2013, compared to a decline in disbursements by as much as 36 per cent in the previous year, according to a report by an industry body.

However, total disbursements during this period were less than Rs 32,418 crore worth of disbursements clocked in FY11. But the growth in lending reflects that the industry is well on the road to recovery after the regulatory crisis hit its key market in Andhra Pradesh.

MFIs located outside Andhra saw disbursements rise 18 per cent over FY12 and even the MFIs based in the state saw a marginal 3 per cent growth in disbursals in FY13.

The growth figures represent 41 MFIs who are part of the industry body called Microfinance Institutions Network (MFIN). These companies, on an aggregated basis, constitute around 85 per cent of the microfinance business in the country.

In spite of the growth this year, the industry still lags behind the peak year in terms of key indicators such as disbursements, equity, portfolio at risk (PAR), number of branches and employee count, MFIN noted in its report.

The number of branches was at a peak of 11,249 in FY11 and fell for the second consecutive year in FY13. However, the decline has been stemmed with 8 per cent fall reported in FY13, as against 12 per cent drop in FY12 over FY11. Moreover, the non-AP MFIs actually saw 4 per cent growth in number of branches last year.

The number of employees, which also hit a peak at 92,221 in FY11, declined for the second year in a row and the industry ended FY13 with 60,721 people. This was largely due to cut in workforce in AP-based MFIs while non-AP MFIs were able to register growth in number of employees during FY13.

On a pan-India basis, the industry’s gross loan portfolio (GLP) grew 23 per cent in FY13 (with MFIs from Andhra Pradesh growing 7 per cent and non-AP MFIs growing 39 per cent) while it de-grew 15 per cent in the previous year.

The industry met a regulatory maze when a spate of farmers committed suicide owing to alleged coercive collection methods by the MFIs in Andhra Pradesh, which brought the state government to pass an ordinance against all the players in the state. However, the Reserve Bank of India brought clarity in the functioning of the MFIs and superseded the tough state law.

Tamil Nadu has the largest number of MFIs while Maharashtra, Madhya Pradesh, Gujarat, Karnataka, Bihar and Uttar Pradesh are other major states in terms of number of MFIs. During Q4 FY13, the first branch of an MFI was opened in Jammu & Kashmir.

However, Andhra Pradesh remains the top state in terms of gross loan portfolio as significant non-performing portfolios continue to stay on the balance sheet of MFIs in that state. The top five states (Andhra Pradesh, West Bengal, Tamil Nadu, Karnataka and Maharashtra) account for 64 per cent of the portfolio.

Tamil Nadu tops in terms of loans disbursed (annual), followed by West Bengal, Karnataka, Maharashtra, Uttar Pradesh and Madhya Pradesh. As of now, West Bengal has the largest branch network of MFIs, accounting for more than 15 per cent of the all-India branch network.

Equity and debt growth

On a pan-India basis, equity levels in the industry continued to deplete due to the write-offs of portfolio in Andhra Pradesh, resulting from the impact of state ordinance as the industry equity levels were growing at a rate of above 40 per cent in FY12, the report noted.

On a positive note, non-AP MFIs have been growing their equity consistently over the past four years. While growth in equity slowed in FY12 due to the overall negative investment scenario, they were able to increase their equity 43 per cent in FY13 and the total equity of the industry stood at Rs 2,099 crore at the end of FY13.

On the debt side, the sector received a debt funding of Rs 10,203 crore, an increase of 79 per cent over FY12. Out of the total increase, AP-based MFIs saw an increased funding of 179 per cent over FY12, largely driven by SKS Microfinance.

(Edited by Sanghamitra Mandal)

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