Q4 2023: MFI portfolio risk factor improves, says Sa-Dhan report

According to the Sa-Dhan report, the microfinance sector has recorded an overall 21 percent growth during the fiscal year 2022-23

India’s microfinance industry's quality has improved, with portfolios at risk almost halving to an average 1.63 percent in the March quarter of FY23 from the year-ago period, recent data from Sa-Dhan, an RBI-recognised self-regulatory organisation for microfinance institutions (MFIs) shows.

The average portfolio at risk (PAR) for the corresponding period of the previous year was at 3.75 percent.

The portfolio quality measured PAR indicated an improvement in all periods. A reduction in PAR means that the sector's risk factor has improved.

The PAR 30+ days per due (dpd) improved to 2.16 percent from 5.27 percent. PAR 60+ dpd improved to 1.67 percent from 3.55 percent and PAR 90+ dpd improved to 1.06 percent from 2.43 percent as on March 31, 2022 compared to the corresponding quarter last year.

Apart from banks and small finance banks (SFBs) which have a PAR of 3.03 percent 2.46 percent, all other lenders have PAR 30+ dpd lower than the industry average of 2.16 percent.

Non-banking financial companies (NBFCs) have the lowest PAR 30+ dpd of 0.98 percent followed by not-for-profit MFIs at 1.56 percent and non-banking financial companies-microfinance institutions (NBFC-MFIs) at 1.60 percent.

Also read: Microfinance industry logs 13% growth in last quarter, shows Sa-Dhan data

Overall, for the financial year 2022-23, total loan disbursement stood at Rs 3.19 lakh crore compared to Rs 2.53 lakh crore last year, posting a growth of 26 percent.

Among the lenders, NBFC-MFIs disbursed the highest Rs 1.24 lakh crore, followed by banks at Rs 1.16 lakh crore.

The number of loan accounts increased to 13.63 crores in FY 22-23 from 12.39 crores in FY 21-22, posting a year-on-year growth of 10 percent.

Market share of lenders in terms of portfolio showed that NBFC-MFIs accounted for the largest share at 39.72 percent.

Banks are the second largest provider of micro-credit at 34.14 percent followed by SFBs, NBFCs and NFPs accounting for 16.62 percent, 8.44 percent and 1.07 percent, respectively.