India: Bengal and Tamil Nadu Usurp AP as MFI New Hubs
India, March, 04 2014 -
For the first time,West Bengal and Tamil Nadu, have individually, surpassed Andhra Pradesh as the largest markets for microfinance loans.
Thus, while, each of West Bengal and Tamil Nadu, account for 14% of MFI clients, Andhra Pradesh accounts for 13% clients, according to MFIN (MicroFinance Institutions Network) Mircometer Report, 2013. As on December 2013, the MFI industry had 26.48 million clients, a growth of 16% over the last year.
In terms of gross loan portfolio (GLP), Andhra Pradesh, with all the bad loans after the repayment crisis in 2010, continues to account for the lion's share at 15% portfolio. Tamil Nadu too accounted for 15% portfolio, followed by West Bengal, which accounted for 14% of portfolio.
A fallout of the geographical churn in the MFI market, has been a stellar growth of mid-sized MFIs outside Andhra Pradesh.
"At present, Andhra Pradesh has zero active client base. Earlier, all large MFIs were based in Andhra Pradesh. Post-crisis, the mid-sized MFIs have emerged really strong,with banks supporting us too," said Samit Ghosh, president, MFIN and CEO of Ujjivan.
The total GLP of the MFI industry, at present, is Rs 23,997 crore, a growth of 29% over the last year. Notably, the MFI industry now is bigger in size over the pre-crisis period, when the GLP of the industry was close to Rs 20,000 crore.
In the last quarter, states which saw high bank funding include,West Bengal, Tamil Nadu, Kerala, Bihar, Assam and Uttar Pradesh.
After a long time, banks too are actively lending to MFIs. Small sized MFIs, with a portfolio less than Rs 100 crore, saw a phenomenal growth in bank funding, nearly 101% increase, over the same period last year.
"Earlier only a few public sector banks were giving loans to the MFIs. This time, a lot many private banks are lending to the MFIs," said Mathew Titus, executive director of Sa-Dhan.
Only recently, the RBI removed a 26% interest rate cap on loans, and instead linked the interest rate to the cost of funds. Another major fillip to the MFI industry has been facilitated by Reserve Bank India's decision to accord Self Regulatory Organization (SRO) status to the industry association for Non-Banking Financial Companies that are engaged in microfinance (NBFC-MFIs).
In the last six to eight months at least 13 new MFIs have sought membership at the two industry bodies-MFIN (Microfinance Institution Network) and Sadhan.
Medium-sized MFIs,with GLP between Rs 100-500 crore, registered a growth of 62%, the highest among all segments, in the last quarter over the same period last year.The GLP growth of the mid sized MFIs in the last quarter showed an impressive70% growth over the same period last year.