Microfinance companies expand reach; Bengal, Tamil Nadu most penetrated

microfinance, microfinance industry

Important to note is that industry has been able to keep delinquency well under control even during most challenging past couple of years.

The Microfinance industry has a presence in 615 of the total 725 districts, implying 85% penetration. However, 210 districts constitute 80% of the portfolio outstanding, as per the latest industry report. Top 30 districts comprise 25% of portfolio outstanding (`400 bn) within which 60% of the districts are based in West Bengal and Tamil Nadu, which contribute 68% to total top-30 district exposure. 67 districts each have portfolio outstanding of <`10 mn.

Notably, PAR 90+ portfolio of each district within top 30 districts is less than 0.5% except for a couple of districts, which we think is a positive sign. Odisha, Kerala and Uttar Pradesh appear to be stressed given their 37%/22%/16% share respectively in top 30 districts with highest delinquency. We like Bandhan Bank and CreditAccess Grameen within MFI space.

Top 30 districts’ portfolio

Most top 30 districts are having PAR90+ portfolio of <0.5%. Important to note is that industry has been able to keep delinquency well under control even during most challenging past couple of years.
NBFC-MFIs continue to maintain their leadershipOver past two years, two trends we have observed in MFI market share are:

(a) SFBs are losing market share rapidly to NBFC-MFIs and NBFCs as reflected in 50% decline in their share to 16% as at Dec’18 from 31% in Mar’17; (b) NBFC-MFIs and NBFCs have witnessed consistent improvement in their market share to 38%/12% from 30%/7%, respectively. Banks’ market share has broadly remained stable at ~31/33%.

High-ticket disbursal share lower

As per the latest MFI report, industry has broadly remained disciplined as reflected in lower share of 3-5% of high-ticket (>`60,000) disbursal over past eight quarters. The share of loan disbursement below `30,000 ticket size stands at 66% as at Dec’18 vs 78% in FY17.

[“source=financialexpress”]