Fusion Finance aims to cut microfin share, offer larger retail loans

Kolkata: Fusion Finance plans to reduce the share of microfinance loans to 70% of assets by the end of fiscal 2029 from 88% at present, as it seeks to diversify risks and bring stability in business.

The Warburg Pincus-backed microfinance company is getting ready to introduce bigger loans to individuals, even as lending to small businesses against property remains the key focus.

The company aims to grow its assets under management to Rs 10,000 crore and raise its return on assets (RoA) to 4% by the end of this fiscal year, managing director Sanjay Garyali said. It managed Rs 7,700 crore at the end of June with an RoA of 3%.


"Our board has approved the plan to offer individual loans. We will introduce the product in September. This is going to be mostly unsecured lending but will not qualify as microfinance as we will target borrowers with more than Rs 3 lakh annual family income,” he said.

Microfinance is a practice of giving loans without collateral largely to women with family income below Rs 3 lakh a year.

"Eventually, the plan is that in the next two-and-a-half years, the microfinance share will come to somewhere around 70%," Garyali said.

The Reserve Bank of India lowered the minimum qualifying asset requirement for non-banking financial company-microfinance institutions (NBFC-MFIs), such as Fusion Finance, to 60% from 75%, allowing lenders to utilise the remaining 40% for non-microfinance loans like small business and MSME lending.

"The individual loans will be given with proper credit assessment. It will not be done like, you know, assumed credit the way lending to joint liability groups happens,” Garyali said. “It is not that only vintage microfinance customers will get this loan. Vintage customers will be qualified, but there will be strong credit oversight."