Since the AP crisis in 2010 and the creation of a new category of NBFC-MFIs in December 2011, the regulations have carefully nurtured the growth of microfinance in India.
The microfinance sector in India today is growing rapidly, allowing small borrowers access to formal credit. This fosters greater financial inclusion. The sector witnessed a three-month growth of 6 percent on the books in the quarter ended December, which is slightly lower compared to 6.9 percent in the previous quarter, and a year-on-year growth of 30.9 percent, which is higher than 26, 6 percent from September 2023. quarter, revealed a recent CRIF High Mark report.
The microfinance sector in the rural markets witnessed growth, soaring by 30.8 percent indeed, while the urban markets experienced a significant growth of 31.2 percent. The outstanding portfolio of microfinance sector stands at Rs 402.6K crore as of December 2023 with the top 10 states contributing to 83 percent. The sector witnessed Rs 89K crore originations (by value) and 186.8 lakh originations (by volume) in Q3 FY24.
Average balance per account witnessed a quarterly growth of 1.9 percent and grew by 6.1 percent by 6.1 percent in December 2023. Average balance per borrower witnessed a quarterly growth of 1.5 percent and grew by 4.3 percent by December 2023, the report said.
NBFC-MFIs dominate the microfinance market
NBFC-MFIs remain dominant lenders in the market, capturing 38.3 percent of the portfolio, followed by Banks at 33.4 percent, SFBs at 17.4 percent and NBFCs at 9.4 percent as of Dec’23. About 12.2 percent qoq growth was witnessed in GLP for banks against 6.2 percent for NBFC-MFIs, 3.7 percent for NBFCs and a decline of 4 percent for SFBs, the report highlighted.
About 52 percent of the portfolio of NBFC-MFIs consisted of loans of portfolio sizes Rs 30K-50K, against 49.8 percent for SFBs, 43.7 percent for NBFCs and 43.7 percent for Banks, the report further stated.
West Bengal witnessed highest decline
The report highlighted that the top 10 states account for 83 percent of the Gross Loan Portfolio (GLP) in December 2023.
Among the top 10 states, West Bengal witnessed highest decline in PAR 90+ DPD from 4.8 percent in Dec’22 to 0.7 percent in Dec’23. Among the top 10 states, Uttar Pradesh, Madhya Pradesh, Rajasthan, Kerala and Maharashtra have higher PAR 90+ DPD than total industry (0.9 percent) in September 2023.
Regional share in expenditure (value) remained stable from Q2 FY24 to Q3 FY24, share of North, Central and West region decreased, the report added.