NBFC-MFIs outpace microfinance industry growth, banks falter

Kolkata: The non-banking finance companies-microfinance institutions (NBFC-MFIs) have consolidated their position in the market with more-than-average 43% year-on-year growth helping them to raise their share of portfolio to 41.28% of the country's total microfinance pie, from around 35% a year ago.

The overall gross micro loan portfolio grew 21% year-on-year to Rs Rs 3.59 lakh crore at the end of June, according to the numbers released by industry organisation Sa-Dhan.

The micro loan portfolio of small finance banks (SFB) and other non-banking finance companies (NBFC) rose 24% each over the same period, supporting the industry expansion even as banks saw a muted 0.86% rise.


“The share of the portfolio indicates that the NBFC-MFIs have become more proactive in their approach taking the benefit of the new regulatory framework of RBI and the positive mood in the country towards MFIs," Sa-dhan executive director Jiji Mammen said.

According to segment wise breakup, banks are the second largest provider of microcredit with 31.99% share,while SFBs and NBFCs accounted for 17.40%, and 9.06% of the market. The not-for-profit entities control the remaining 0.27%.
NBFC-MFIs are holding the highest market share in terms of portfolio from the third quarter of FY23 onwards.

The inclusion of not-for-profit lender Cashpor Micro Credit within NBFC-MFI fold also helped their aggregate number. Cashpor had a Rs 4670 crore portfolio at the end of June. The lender intends to continue as a not-for-profit entity even after its new classification, as per the new regulatory framework for microfinance loans which directed section 8 companies with portfolios above Rs 100 crore to get an NBFC-MFI registration.

Without Cashpor's data, the NBFC-MFIs's gorwth was also a significant 40.5% year-on-year.

Meanwhile, banks as a cluster saw almost flat growth, because of Bandhan Bank, which reported a lower microfinance book of Rs 51,000 crore at the end of June, as against Rs 57,000 crore a year back.

This was perhaps one of the reasons for West Bengal, where Bandhan Bank enjoys an advantage, to see a 8% portfolio shrinkage.

In constart, The states in terms of the portfolio that have recorded yearly growth higher than the industry growth rate are Bihar at 37%, Tamil Nadu at 28%, Uttar Pradesh at 41%, Karnataka at 28% and Rajasthan at 22%. The top five states in terms of portfolio are Bihar, Tamil Nadu, Uttar Pradesh, Karnataka and West Bengal, together accounting for about 56% of the total portfolio.

Notwithstanding the overall good set of numbers, Mammen expressed concerns over the local issues in different geographies disrupting business and an organised move by some to mislead the vulnerable people. "There has to be constant vigil by the law enforcing agencies against such unscrupulous elements who can destroy the credit culture in the country,” he said.

The states experiencing negative year-on-year growth in portfolio are mostly from north eastern region with Assam leading the chart with 35%, followed by Nagaland (-33%), Sikkim (-24%), Tripura (-19%), Manipur (-16%) and Meghalaya (-10%).