Credit and Finance for MSMEs: Even as microfinance lending, which targets micro and small business owners and individuals, was able to recover to the pre-pandemic mark by Q4 FY21, the second wave and the following lockdown put a severe dent in the sector’s growth in the first quarter of the current financial year. The growth in the gross loan portfolio of lenders declined by 7 per cent quarter-on-quarter (QoQ) from Rs 253.8k crore in Q4FY21 to Rs 236.1k crore in the April-June quarter of FY22 while year-on-year (YoY) growth was less than 1 per cent from Rs 234.1k crore, according to the latest Crif MicroLend report on India’s microfinance sector.
The quarter also witnessed a steep QoQ decline in disbursements along with high delinquencies. Rs 23.7K crore was disbursed in Q1 FY22, down 73 per cent from Rs 88.5k crore in Q4 FY21 while in comparison to Q1 FY21, disbursements grew 273.4 per cent from Rs 6,372 crore. The average ticket size also declined by 7.4 per cent from Rs 38,900 in Q4 FY21 to Rs 36,000 in Q1 FY22 with maximum degrowth of 11.7 per cent recorded in Rs 20k-30k ticket size followed by 10.5 per cent contraction in Rs 30k-40k ticket size. Loans over Rs 60,000 declined by only 2.5 per cent. Even in terms of YoY performance, the average ticket size managed to improve by only 0.9 per cent with the highest growth of 56.6 per cent witnessed in the less than Rs 10,000-loan bracket.
“From July till December last year, there was a good recovery while in January-March 2021 quarter, the recovery further improved vis-a-vis the year-ago period even though the delinquencies were still high. Due to the second wave, delinquencies increased and originations also dropped. However, monthly inquiries have improved since then till September this year. So, we expect good recovery in the second quarter of the current financial year. We should see a corresponding increase in originations as well since both inquiries and originations are correlated,” Srikanth Goli, Associate Vice President, Research & Insights Crif High mark told TheSpuzz Online.
The month-on-month growth in loan inquiries in September was 7.1 per cent from August while it improved from minus 66 per cent in May to 174 per cent in June and 87 per cent in July.
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In terms of delinquencies, portfolio at risk (PAR) or proportion of portfolio delinquent by 31-180 days past due (30+ DPD), calculated as a percentage of total portfolio outstanding, was 15.4 per cent in June 2021 — higher compared to 9.7 per cent in March 2021 for all ticket sizes and all lender types. On the other hand, PAR 90+ (91-180 days past due) DPD had improved to 3.3 per cent in June 2021 from 4.4 per cent in the preceding quarter. The high PAR 90+ DPD in March 2021 since March 2020 led to a roll forward into PAR 180+ DPD in June 2021 that stood at 7.1 per cent from 4.4 per cent in March quarter and 4.5 per cent in June quarter FY21.
“June quarter was one of the worst quarters for the sector including small finance banks. Customers didn’t seek fresh credit during that time as there was no productive purpose due to lockdown restrictions. However, things have recovered after July, and I believe the pre-pandemic recovery would be achieved by December as we see high demand from customers amid the festive season. At Satya, our portfolio dipped in the first quarter by 3-4 per cent but we recovered after that and during the first half of the current financial year, we have registered around 10 per cent growth in our portfolio,” Vineet Tiwari, Managing Director, Satya MicroCapital told TheSpuzz Online.
The average balance per account also recorded a quarterly decline of 3.2 per cent in June to Rs 21.9k from Rs 22.7k in March after recovering from Rs 21.3k in June last fiscal year. Moreover, while banks continued to dominate the market with a portfolio share of 42 per cent (Rs 99.6k crore book size) followed by a 30 per cent (Rs 72.1k crore book size) share of NBFCs, there was a quarterly decline in the gross portfolio across all lender types including small finance banks and others.