INSUBCONTINENT EXCLUSIVE:
Kolkata: Capital requirement for microfinance firms may shrink in the next few years, with many of them adopting new business models
wherein these entities originate loans on behalf of their partner banks, to conserve capital
3500-4700 crore of capital requirement for MFIs and small finance banks together over the next three years to maintain 25-30% annual growth
This is in comparison to Rs 4350 crore equity expansion by MFIs in FY19
More than 90% of the capital raised in FY2019 was by the MFIs with asset under management of more than Rs 1,000 crore
challenges in raising both equity capital and debt, as these entities were more dependent on larger NBFCs for funding
Fund flow for them had dried up immediately after the ILFS-led liquidity crisis, hampering their business in October and November last year
The cost of funds for the MFIs may remain at elevated levels till the systemic liquidity improves.
MFIs across the spectrum resorted to
increased securitisation of portfolios and further enhanced their business correspondent relationships.
ICRA estimated that NBFC-MFIs raised
around Rs 26,200 crore through securitisation of micro loan pools in FY19, which was nearly three times over Rs 9,700 crore quantum
witnessed in FY18.
The sector grew 28% during the 12 months ended December 2018 as against 26% in FY2018 and has despite trouble in the
The overall micro loan market size (including SHG Bank linkage programme) was Rs 2.37 lakh crore as on December 31, 2018.
The portfolio
quality of MFIs has improved during this period with portfolio at risk for less than 30 days fell to 0.99% as on September last year.