The microfinance sector is booming again

- With the increase in loan repayments in this sector, the collection efficiency increased to 95 percent

The quality of assets of lenders in the microfinance sector has gradually improved with a portfolio at risk (PAR) of more than 60 days, which has come down to 10.15% from 12.5% ​​on September 30, 2021, according to a quarterly review of the sector. The country's microfinance sector saw a significant improvement in loan repayments in the second quarter of the current financial year, while the microfinance sector saw a significant improvement in loan repayments in the second quarter of the current financial year. While the average collection efficiency for micro loans increased from about 3% in the first quarter to more than 3%.

The region was plunged into a serious crisis due to the epidemic. During that time, there was a break in the work done in this field and an unfavorable atmosphere was created in the field of collection. However, the microfinance sector is recovering from the epidemic.

In the second quarter of the current financial year, the micro-credit portfolio of lenders stood at Rs. 2,3,31 crore, which was 1.1% less than the year-on-year basis. The total disbursement of all lenders, however, during the same period of FY 21 was Rs. 2.15 crore as against Rs. 2.5 crore. The average ticket size is also Rs. 2.5 to Rs. 5,108.

The sector that was affected in the first quarter of this financial year by the second wave of Kovid has seen an improvement in repayments and new distributions. However, there remains tension over fund access and the performance of mid- and small MFis.

The sector is expected to recover slowly by the third quarter as borrowers' incomes stabilize. The government has been asked to sanction an additional Rs 4,500 crore under the credit guarantee scheme for the sector. This was stated by the circles in the area. Storage efficiency in Assam and Kerala improved in the second quarter compared to the first quarter but the figures lag far behind the national average due to 'external issues'.

The Assam government has started the process of providing one-time relief to distressed microfinance borrowers in the state after signing a memorandum of understanding with microfinance lenders in August for implementation of relief schemes. For Kerala, large number of covid positive cases and recent floods have affected loan repayments.

For the entire industry, the portfolio at risk (PAR) above 30 days has improved from 6.41% on June 30, 2021 to 6.5% on September 30, 2018. And, above 30 days (PAR) at the end of the second was 4.5%. Thus, the vehicle of the microfinance sector, which has been facing many difficulties due to the epidemic, is slowly getting back on track. However, there are still many challenges facing the sector. The rising unemployment rate in rural areas has raised concerns in the region.