The microfinance sector is experiencing significant growth, as indicated by a 9% year-on-year increase in the number of loan accounts serviced by micro lenders, totalling 140.8 million as of December 31.
Notably, microfinance disbursements by diversified NBFCs surged by 32% year-on-year in the December quarter, the highest growth rate among all players.
Banks also saw a substantial increase in disbursements, rising by 27% year-on-year, while NBFC-MFIs experienced a 15% increase. However, small finance banks only saw a 4% rise, and disbursements by non-profit MFIs declined by 17%.
Microfinance-focused non-banking financial companies (NBFCs) held a significant share in the segment, capturing 40% of the market. Banks accounted for 32% of the market share, followed by small finance banks (SFBs) at 18%, diversified NBFCs at 11%, and non-profit microfinance institutions at 0.18%.
Region-wise spread
Currently, the majority of microfinance activity is concentrated in Bihar, Tamil Nadu, Uttar Pradesh, Karnataka, and West Bengal, which collectively account for 57% of the industry’s portfolio. Bihar, in particular, stands out with a loan portfolio totaling Rs 58,706 crore as of December 31.
Additionally, the number of districts with portfolios exceeding Rs 2,000 crore increased to 30 districts, up from 14 districts a year ago, with a significant portion located in Bihar.
| Despite the expansion, there were positive trends in asset quality, with the portfolio at risk for loans overdue by more than 30 days decreasing to 2.24% from 3.43% year-on-year. |
Similarly, the portfolio at risk for loans overdue by more than 60 days improved to 1.63% from 2.60% year-on-year.Experts note that the microfinance sector’s overall performance has been impressive, with consistent growth observed over the past two quarters. They anticipate this growth trajectory to continue in the coming years. However, they emphasize the importance of expanding microfinance services to underserved regions to sustain this momentum.
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