Microfinance industry loan portfolio will rise to Rs 4.24 lakh crore by March-end: MFIN CEO Alok Misra

Dr. Alok Misra, CEO and Director, Microfinance Industry Network (MFIN)

The total loan portfolio of the microfinance industry is likely to grow to Rs 4.24 lakh crore by the end of the current financial year, said Microfinance Institutions of India (MFIN) CEO and Director Alok Misra, in an exclusive interview with Moneycontrol.

Microfinance loans are small amounts of credit given to low-income individuals or groups with less access to formal financial services.

“In lending terms, microfinance companies, as of December, 2023, had reached a portfolio of around Rs 4 lakh crore. On a Y-o-Y basis, we will see roughly around 20-25 percent growth,” Misra said.

“I feel the portfolio will stabilise around Rs 4.20 lakh crore to Rs 4.24 lakh crore by March-end,” he added.

According to the MFIN Micrometer report for Q2FY24, India's microfinance loan portfolio stood at Rs 3,76,110 crore as of September 30, 2023.

In 2023, the microfinance loan portfolio increased by 22 percent to Rs 3.48 lakh crore, according to a report by MFIN. The gross loan portfolio stood at Rs 2.85 lakh crore as on March 31, 2022.

The number of unique borrowers in this segment saw an uptick to 7.1 crore as on September 30, 2023 from 6.6 crore as on March 31, 2023. Similarly, loan accounts increased to 13.9 crore as on September 30, 2023, from 13 crore at the end of the last financial year, according to MFIN data.

On the new clients addition front, Misra said the industry will add 75 lakh to 80 lakh clients. During 2022-23, the microfinance industry added 80 lakh new women clients.

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NBFCs lead

So far, NBFC-MFIs have the largest share in lending in this sector.

In 2023, Of the total microloans outstanding, the largest share was held by 91 NBFC-MFIs, amounting to Rs 1,47,829 crore.

This was followed by banks, with Rs 1,18,846 crore; small finance banks: Rs 73,118 crore; and NBFCs: Rs 34,369 crore.

The portfolio of NBFC-MFIs increased by 33.9 percent, banks by 4.7 percent, SFBs by 46.2 percent, and NBFCs by 44.6 percent between September 2022, and September 2023.

Portfolio at risk

Misra said there is an improvement in the portfolio at risk so far in this financial year and the metric may improve further.

“The repayment graph is also coming back to pre-pandemic levels,” he added.

Portfolio at Risk (PAR) measures the percentage of microfinance loans outstanding in a lender’s total loan portfolio that are at risk of default. Usually, these are overdue by 30 days or more.

As of March 31, 2023, PAR 31-60 days stood at 0.45 percent; 61-90 days stood at 0.55 percent; 91-180 days stood at 0.96 percent.

Further, the 180 days and above PAR stood at 8.56 percent of the total lending book.

Misra said the 180-day and above PAR is the covid remnant, which has already been written off and provided for by institutions.

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Microfinance, digital lending overlap

Microfinance Institutions Network has written to the Reserve Bank of India (RBI) for a review of the overlap in microfinance and digital lending.

“We have already written to the RBI and recently we raised this issue with the regulator. So far, we have not received any communication from the RBI,” Misra said.

MFIN wants the RBI to ensure that fintech lenders comply with microfinance regulations, as failing to do so would lead to weak underwriting and customer protection. Further, it wants the data to be reported to the microfinance bureau and not the retail credit bureau, and the central bank to review fintech lenders’ interest rates and recovery practices.