Banks dominate microfinance industry with over 35% share, says report

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Banks had a 37.9 percent share of the microfinance industry in the quarter ended December 2021, according to a report by CRIF High Mark Credit Information Services. The study also finds that non-banking financial companies (NBFCs) constitute the second largest segment with a share of more than 33 percent of the market.

Geographically, banks’ dominance is highest in the eastern zone. The report says “44.5 percent of banks’ portfolios are concentrated in the eastern region. NBFC MFIs (microfinance institutions) have 29 percent share in the East and 27 percent in the South. SFBs (small finance banks) have a concentration of 38 percent in the South.” State-wise, Tamil Nadu records the highest number of borrowers with exposure to multiple lenders. On the other end, West Bengal has the least number of borrowers dealing with multiple lenders.

While banks have the largest share of the portfolio, it has shrunk 1.3 percent on a quarterly basis, the report said.

This was the story in terms of disbursements as well, with banks’ share slipping 19 percent over Q2FY22.

The average ticket size for micro-lending by banks and NBFCs MFIs grew by 13.3 percent and 8.1 percent, respectively, in Q3FY22 on a quarter-on-quarter basis.

There has been a steady growth of the microfinance industry, reflected in the study’s figures of portfolio outstanding of the sector at Rs 2,63,900 crore in December, a quarterly increase of 5.9 percent and 10.4 percent on an annualised basis.

“The surge in COVID-19 cases in India associated with the Omicron variant has impacted microlending in Q3FY22, marked by a decline in disbursements. However, lenders are hopeful that the recent extension of the Emergency Credit Line Guarantee Scheme for another year will provide the necessary fillip to the microfinance sector in the coming months,” the report said.