Kolkata: The pure-play microfinance lenders, which are back on a strong growth trajectory after the pandemic blip, would need to raise fresh capital in FY25 to keep the momentum going, Acuite Ratings & Research said.
It has projected the country’s overall microfinance portfolio to grow to Rs 4 lakh crore by the end of March 2024 from Rs 3.5 lakh crore as of March 2023.
“Raising fresh capital will be critical after FY24, given that the average leverage will be close to 4x by the current fiscal year-end,” Acuite said in a note.
The non-banking finance company-microfinance institutions (NBFC-MFIs) recorded a compounded annual growth rate (CAGR) of 24.6% in FY21-23 despite the pandemic and they raised their market share to 39.7%, highest in all categories of microfinance lenders.
“We expect the total microfinance portfolio to grow at over 20% in the current fiscal. However, such rapid growth will necessitate the higher deployment of technology to mitigate risks and intensive use of credit analytics. Further, many MFIs would also need to raise fresh capital after FY24,” Acuite’s chief economist Suman Chowdhury said.
The NBFC-MFI group saw a 37% rise in outstanding portfolio to Rs 1.40 lakh crore at the end of March, consolidating the group’s numero uno position as the provider of micro loans. Banks (excluding small finance banks) remained the second largest group in micro lending to joint liability group members with Rs 1.2 lakh crore loan. This number does not include bank loans given to self-help groups. Small finance banks had 16.6% microfinance market share.
“Indian microfinance sector is an exemplary model of a business which has demonstrated resilience to multiple crises over the last two decades. The sector has recovered well from the Covid pandemic and is in for a new virtuous cycle with increasing use of digital technology and improved risk management,” said Acuite managing director Sankar Chakraborti.
