Ever 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 is fostering greater financial inclusion. The sector witnessed a quarterly growth of 6.9 per cent in the book in September-ended quarter, which is higher compared to 5.2 per cent in the previous quarter, and yoy growth of 26.6 per cent which is slightly higher than 24.3 per cent of June 2023 quarter, revealed a recent report by CRIF High Mark.
The microfinance sector in the rural markets witnessed growth, soaring by 28.1 per cent yoy, while the urban markets experienced a significant increase of 24.4 per cent. The portfolio outstanding stands at Rs 379.8K crore as of September 2023 with the top 10 states contributing to 83.4 per cent. The sector witnessed Rs 85.9K crore originations (by value) and 189.5 lakh originations (by volume) in Q2 FY24.
Average balance per account witnessed quarterly de-growth of 3.3 per cent and grew yoy by 5.8 per cent as of September 2023. Average balance per borrower witnessed qoq de-growth of 3 per cent and grew yoy by 1 per cent as of September 2023, the report said.
NBFCs dominate the microfinance market
NBFCs remain dominant lenders in the market, capturing 39 per cent of the portfolio, followed by Banks at 31.6 per cent and SFBs at 19.2 per cent. About 19.5 per cent qoq growth was witnessed in GLP for SFBs, 9.9 per cent for NBFCs as against 3.9 per cent for Banks and 3.3 per cent for NBFC-MFIs as of September 2023, highlighted the report.
Around 52 per cent of NBFC MFIs’ portfolio comprised of loans of ticket sizes Rs 30K-50K, as against 50.4 per cent for SFBs, 45.4 per cent for NBFCs and 45.1 per cent
for Banks, the report further stated.
Kerala witnessed highest growth
The report highlighted that the top 10 states constitute 83.4 per cent of the Gross Loan Portfolio (GLP) as of September 2023.
Kerala, Karnataka and Tamil Nadu recorded highest qoq growth of 16.2 per cent, 10.2 per cent and 9.9 per cent respectively as of September 2023. Average balance per borrower for top states Bihar, Tamil Nadu and Uttar Pradesh stood at Rs 56.8K, Rs 60.6K, Rs 48K respectively as of September 2023.
Microfinance sector was dominated by Eastern region (34 per cent) followed by Southern (32.9 per cent), as of September 2023. NBFC MFIs have 30.3 per cent share in East while SFBs have concentration of 49.1 per cent in South, the report added.