Microfinance Asset Quality Worsened In September On Lower Collections: CRIF

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Microlenders have seen their asset quality worsen over the past year on lower repayment and collection levels during the pandemic.

The early delinquency rate—portfolio at risk for 30 days past due—rose to 15.7% as of September 2020, according to a report by credit information agency CRIF High Mark. That compares with 2.3% in the preceding quarter and 1.3% a year earlier.

  • The portfolio at risk for 31-180 days past due rose by 1.2 percentage points sequentially in July-September to 2.6%.

  • Loans due for more than 180 days fell 1 percentage point sequentially to 3.1%.

  • The loan writeoff amount nearly doubled to 3% in September compared with 1.6% as of March.

“In the quarter ended Sep. 30, delinquency levels for lenders in the microfinance space have risen quite sharply. This is an aberrant, short-term phenomenon,” Alok Prasad, former chief executive of Microfinance Institutions Network, said. “Collection efficiencies have been improving over the past few months and should, broadly, reach normal levels by the end of this fiscal. However, from a forward looking perspective, the industry has to be ready for a significant level of writeoffs, say in the 5-10% range.”

Among the top ten states for microfinance, West Bengal fared the worst as early repayment stress spiked to 31.72%, followed by Assam with 27.3% loans due past 30 days as of September.

In the immediate aftermath of the six-month moratorium period declared by Reserve bank of India even as normalcy in business operations ensued, microfinance borrowers impacted severely due to the lockdown were not able to repay their dues, the report said. That led to “phenomenally high early delinquency value”.

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