Microfinance industry keeps its fingers crossed for recovery

With the economy showing signs of recovery, and the number of Covid-19 cases falling, the microfinance loan repayment has seen a sharp increase. The industry, however, remains guarded because if the third wave of the pandemic strikes the recovery could also hit further. At the same time, leader players are pinning their hopes on recovery by around Durga Puja time, the busy season for the industry.

Loan repayment has gone up sharply to approximately 90% on an average by July-end from a low of 65-75% in May-June, as per a report in The Economic Times.

India’s largest microfinance player Bandhan Bank’s managing director Chandra Shekhar Ghosh told that recovery is expected around Puja time. It could be delayed by another quarter if the third wave strikes, he added.

Another leading player CreditAccess Grameen said its collection efficiency went up to 91% in July from 81% in June. For Ujjivan Small Finance Bank, it was 93% in July against 78% in June. Suryoday Small Finance Bank saw a jump in collection efficiency to 79% in July.

Satin Creditcare Network chairman HP Singh told the newspaper that loan disbursal and repayment are likely to be at pre-second wave level by September.

The sector had disbursed Rs 25,820 crore in April-June period, 14% down compared to January-March quarter, according to data collated by Sa-Dhan.

Gross loan outstanding also declined by 14% to Rs 2,14,528 crore from Rs 2,49,333 crore three months back.

P Satish, executive director at Sa-Dhan, said the microfinance industry witnessed recovery in July.

Microfinance lenders profitability was impacted in the June quarter as they had higher loan provisions in place as a safeguard against future risk.