Asset quality pressure continues to weigh on MFI industry

The microfinance industry that has faced rough weather in the past few months, with demonetisation coupled with elections in a few states putting the brakes on the industry’s impressive growth will see asset quality stress to persist for sometime; said a report from Edelweiss Research.

However, listed companies- Bharat Financial Inclusion, Equitas and Ujjivan have performed better than their unlisted peers.

“Our analysis indicates that listed players have relatively lower asset quality stress,” said the report. “This implies higher stress in a few unlisted large players or MFIs with higher exposure to UP/Maharashtra or small MFI players.”

“We expect the near-term asset quality overhang to persist,” the report said. “Delving deeper into Q4FY17 reported numbers of listed entities, we believe a large part of stress in the industry is emanating from a few unlisted large players which have grown aggressively or entities with higher exposure to UP & Maharashtra or small MFI players facing liquidity crunch.”