Microfinance – A Protracted Credit Cycle On The Cards: ICICI Securities

ICICI Securities Report

The microfinance industry demonstrated commendable resiliency during the throes of the Covid-19 pandemic – none of the lenders reported full-year losses between FY21–23.

However, aggressive growth, revised MFI regulation (removal of three-lender cap and FOIR-based lending) and increased competition post covid (as per our recent channel checks, more than 20 players entered Gujarat in the last year; such is the case in north and west India too) led to customer-level over-leverage.

The share of more than 100K ticket-size borrowers grew to 4.5% by March 2024, from 2.1% in Mar-23. Similarly, borrowers with more than four lenders touched a peak of 8.4% in Q2 FY24, from 4% in March-22, derailing collection momentum since Sep-23; June-24 was the worst hit in terms of collections.

We believe, collection shall remain sluggish in Q2 FY25 as well and would lead to elevated credit cost in near-term. Prefer CreditAccess Grameen, Utkarsh SFB and Spandana within MFI space.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.