INSUBCONTINENT EXCLUSIVE:
KOLKATA: Net interest margins (NIMs) of micro-finance institutions (MFIs) would be under considerable pressure as competition rises in the
sector, a study by KPMG has said.
"As the competitive intensity for MFIs increase, the pressure on NIM will increase considerably
So, the need for the MFIs to focus on non-interest income/credit plus products becomes very important," it said.
The MFIs can additionally
enhance penetration of insurance in general and life insurance sector with simple, contextual and small-ticket products, based on the needs
of the segment, KPMG said in the report.
In the last three years, MFI players have grown their disbursements at a CAGR of almost 50 per
cent, it said, adding, the potential was available in relatively underpenetrated regions of the north, east and central parts.
KPMG said the
MFI sectors awaited parity in terms of restrictions related to lending, when compared to small finance banks.
The entry of small finance
banks had impacted the pricing, ticket sizes, product features and repayment behaviour, the study said.
Going forward, the need to evaluate
the overall indebtedness of the borrower and households at the time of underwriting would be critical, given the exposure of this segment to
multiple lending firms, the KPMG study noted.
This will impact the operations (including wage costs) of the MFIs, which primarily rely on
income declaration and residence proofs of the borrowers, it added.
