Kolkata: The microfinance market recorded a month-on-month growth in gross loan portfolio in February, with large lenders increasing loan disbursements to customers with robust track record.
The sector's total book size stood at Rs 3.29 lakh crore at the end of February, up 2.5% over the previous month, according to a monthly update by credit bureau Equifax India, which it circulated among members. ET saw a copy of the document.
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The portfolio quality improved further sequentially, while the ageing bad loan ratio declined after two months.
Microfinance market leaders are now advocating disciplined expansion, and not hyper growth, having burnt their fingers after over-lending to borrowers at the bottom of the pyramid segment. Overleveraged customers and their failure to service loans were at the heart of the microfinance crisis over the past two years.
“Growth will return, but the sector must be anchored in affordability, tighter underwriting and disciplined expansion,” said Fusion Finance managing director Sanjay Garyali. “We need to leverage technology to build stronger credit filters, improve income recognition and remove onboarding friction while enhancing control. We also need to stay committed to guardrails.”
The Equifax report showed that dues that remain unpaid for 30-179 days fell 52 basis point month-on-month to 2.8%. The ratio of loans that remained unpaid for more than 180 days fell 15 bps to 16.8%. A basis point is a hundredth of a percentage point.
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“The future growth has to be a cautious one, calibrated towards increasing the income generating capacity of the microfinance borrowers. Also, digitisation should be a priority so as to bring out optimum efficiencies across this sector,” said HP Singh, chairman, Satin Creditcare Network.
The month-on-month growth in February was supported by a migration to higher-value loans as lenders relied on time-tested borrowers rather than exploring new markets.
The average ticket size climbed to its highest-ever level of ₹61,253 in December last year, up 16% year-on-year, reflecting a cumulative shift toward higher-value lending.
Garyali said that the focus had also shifted to bringing back low-leverage customers who dropped out voluntarily from the system.
The sector's total book size stood at Rs 3.29 lakh crore at the end of February, up 2.5% over the previous month, according to a monthly update by credit bureau Equifax India, which it circulated among members. ET saw a copy of the document.
Also Read | Deposits continues to lag credit growth, credit-deposit ratio at record high
The portfolio quality improved further sequentially, while the ageing bad loan ratio declined after two months.
Microfinance market leaders are now advocating disciplined expansion, and not hyper growth, having burnt their fingers after over-lending to borrowers at the bottom of the pyramid segment. Overleveraged customers and their failure to service loans were at the heart of the microfinance crisis over the past two years.
Disciplined expansion
The market size contracted to ₹3.21 lakh crore at the end of January, down nearly 28% from the peak of ₹4.43 lakh crore seen at the end of March 2024.“Growth will return, but the sector must be anchored in affordability, tighter underwriting and disciplined expansion,” said Fusion Finance managing director Sanjay Garyali. “We need to leverage technology to build stronger credit filters, improve income recognition and remove onboarding friction while enhancing control. We also need to stay committed to guardrails.”
The Equifax report showed that dues that remain unpaid for 30-179 days fell 52 basis point month-on-month to 2.8%. The ratio of loans that remained unpaid for more than 180 days fell 15 bps to 16.8%. A basis point is a hundredth of a percentage point.
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“The future growth has to be a cautious one, calibrated towards increasing the income generating capacity of the microfinance borrowers. Also, digitisation should be a priority so as to bring out optimum efficiencies across this sector,” said HP Singh, chairman, Satin Creditcare Network.
The month-on-month growth in February was supported by a migration to higher-value loans as lenders relied on time-tested borrowers rather than exploring new markets.
The average ticket size climbed to its highest-ever level of ₹61,253 in December last year, up 16% year-on-year, reflecting a cumulative shift toward higher-value lending.
Garyali said that the focus had also shifted to bringing back low-leverage customers who dropped out voluntarily from the system.
