Collections in the North for Satin Credit Care have started picking up but disbursements may gain traction once currency supply increases, says Founder and MD HP Singh.
In an interview to CNBC-TV18 Singh notes it will take some time before collections reach the 98 percent levels, which according to analysts is a critical level for micro-finance companies to function smoothly. So far collections have only managed to touch about 60-70 percent levels from lows of 30-40 percent seen immediately the post demonetisation announcement, he adds.
Around 60-65 percent of the company’s clients have bank accounts but most are likely to be dormant, he says. The challenge will not only be to get these accounts activated and also bring on board the balance 30-40 percent, so that transactions can go cashless, he adds.Below is the verbatim transcript of HP Singh’s interview to Latha Venkatesh, Anuj Singhal and Sonia Shenoy on CNBC-TV18. Sonia: Yesterday Bharat Financial Inclusion told us that disbursements have picked up slightly in the last one week or so and the situation is not as bad now as it was in the week post November 8. How is the situation up in the north?
A: I think in the north also it is the same phenomena. The collections have started picking up post the demonetisation in Madhya Pradesh, Rajasthan, Punjab and Haryana including some parts of Uttar Preadesh. So, it is much better. As the currency supply increases across in the rural space as such, I think it will start getting better and better. So, it is somewhat better than the previous week. Latha: An analyst was telling us that unless MFIs get 98 percent of their collections going, the business can be disrupted. Is that a fair number and when do you expect collections to reach that level?
A: I think if you look at the previous history, 98 percent has been there with us for a fairly long time because of the strength of the business model. However, this has been a very different kind of a disruption. So, I think reaching 98 percent is still some while away. The point which I would like to make is that it is not the intent which is actually hurting, it is in fact the supply of the currency which is really hurting and in terms of also disruption in their economic activity because they are probably today standing in the queue from the banks to get their currency back.
So, I think that is the reason why it is hurting and that is why the reason why the collections are low. So, I think 98 percent as a benchmark technically will be some time away but I think that is probably not the right figure which we are really looking at. In our sense, 60-70 percent, even if it has come up to this level right now, is fairly good enough for this industry which is very cash intensive. Anuj: For SMEs and MSMEs and I would assume that you deal with a lot of them, is there going to be a prolonged pain over the next one or two years?
A: SME because we deal with microfinance, technically and the installments are very less in their repayment as probably an SME would be, but yes they are also into some economic activity. So, I think it is going to be some while, I think not maybe about a year or so but I think maybe in the next couple of months it is going to be a little impacted. I think it is surely going to pick up because the installment amounts are pretty less in terms of microfinance. So, I think it will probably have a far better ratio in terms of the repayment as compared to larger ticket size and larger amounts for SMEs and the higher ticket size loans as such.