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Loans to bottom of pyramid pick up, but repayments still a concern


MUMBAI: The microfinance sector is slowly returning to normalcy with a spike in fresh disbursements, but repayments remain a concern with delinquencies on the rise, according to a report by credit bureau Crif Highmark.

With near nil economic activity in the first quarter of the financial year, the sector witnessed a huge decline in fresh disbursements, 88% lower compared to same quarter last year.

In Q2 FY 2020-21, as the lockdown was lifted and slight normalcy resumed in business operations, disbursements in the sector went up swiftly, witnessing a 380% spike (by value) over the first quarter. While Q1′ FY 2020-21 saw disbursements largely of smaller ticket sized loans up to Rs 2000, in the post lockdown period in Q2′ FY 2020-21, the share of disbursements of larger ticket sized loans of greater than Rs 40,000 increased by 10%.

However, repayments and collections still remain a concern for the sector, more so as the collection mechanism still continues to be physical and reach based, rather than digital according to the report.

As the loan moratorium period came to a close in August 2020, early delinquencies by value risky portfolio which were upto 30 days past due spiked up to as high as 15.7% as of September 2020, those due between 31 days and 180 too increased by 1.2% over the previous quarter and stood at 2.6% as of Sep 2020.m Crif Highmark said.

The top 10 states retain 83% of the national GLP, as of September 2020. The regional distribution of the microfinance portfolio has largely remained consistent from the previous quarter with the eastern region dominating the market with a share of 34.7 per cent followed by South (26.3%), West (14.6%), North (10.5%), Central (7.7%) and North East (6.9%). Loan portfolios contracted in all regions except North East which has seen a growth of 2 per cent over the previous quarter, coming into September 2020.





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