Report CRIF High Mark

The thirteenth edition of CRIF MicroLend – quarterly publication with an overview of the Micro-lending industry in India. The current edition provides insights on the micro-lending portfolio as of September 2020.

Please find enclosed the report for your perusal.

We will be happy to facilitate inputs from the leadership team at CRIF, please do let us know should you need.

Captured below are the key observations from the report:

•       The GLP of the microfinance sector stands at ₹ 224K crores in Q2 FY 2020-21, declining by another 1.15% from Q1 FY 2020-21.

•       Disbursements regained pace in Q2 FY 2020-21, as lending operations resumed in the new normal, witnessing an increase of 380%, reaching ₹29.7K crore.

•       In Q2 FY 2020-21, loans of higher ticket sizes >40K saw a 10% spike in disbursements over the previous quarter.

•       As of Sep 2020, early repayment stress (1-30 DPD) spiked to 15.7%.

•       The monthly forward flow rates for 0-180 DPD observed in Sep 2020, spiked to 15%, with banks with the most stressed monthly forward flow rates at 26%, followed by SFBs at 14% and NBFC MFIs at 11%.

Quote from Navin Chandani, MD & CEO, CRIF High Mark: “As of Sept 2020, the microfinance sector stood at ₹224K crores, witnessing a Y-o-Y growth of 14%. Post lockdown, as lending operations resumed in the new normal, disbursements also regained pace in Q2 FY 2020-21, witnessing an increase of 380% over the previous quarter. The portfolio shows some possible stress with early delinquency (1-30 DPD) at 15.7%. The efforts by the industry and policy makers to leverage technology and develop effective digital collection mechanisms is the right step forward in maintaining control.”

CRIF’s Views:

The microfinance sector in India felt a severe impact of the Coronavirus pandemic with the government announcing a lockdown in the start of the financial year. The GLP of the sector as of Sep 2020 stood at ₹224 crore, witnessing another 1.15% decline over the previous quarter. However, compared to the previous year, the GLP grew by 14% as of Sep 2020. 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 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 20K, in the post lockdown period in Q2 FY 2020-21, the share of disbursements of larger ticket sized loans >40K increased by 10%.

In the immediate aftermath of the 6-month moratorium period declared by RBI, even as normalcy in business operations began to ensue, microfinance borrowers who were impacted severely due to the lockdown were not able to repay their dues, leading to phenomenally high early delinquencies by value (PAR 1-30 DPD) at 15.7% as of Sep 2020. West Bengal which retained its position as the top microfinance market as of Sep 2020, had 31.7% PAR 1-30 DPD by value. Early repayment stress was felt across geographies. Derailed by the COVID 19 pandemic, the microfinance sector is slowly and steadily returning to its tracks, with a spike in fresh disbursements. However, since the pandemic is anything but over, 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. In such times, for greater sustainability and growth, it is important for the industry, policy makers and regulators to work in tandem and develop more effective collection mechanisms by leveraging technology, while continuing to advance financial inclusion and graduation of borrowers to enterprise loans.