India’s microfinance industry grew by 31 per cent in 2019-20 despite the impact of the Covid-19 pandemic, according to a report by microfinance industry body, Sa-Dhan. Microfinance institutions (MFIs) are companies that borrow from banks and lend to their borrowers at a margin.

According to Sa-Dhan’s “Bharat Microfinance Report –2020”, the industry clocked a loan portfolio outstanding of Rs 2,36,427 crore as on March 31, 2020. This is according to data collated from 252 lenders, including microfinance institutions, not-for-profit microfinance institutions, NBFCs, SFBs, and Banks, Sa-Dhan said in its report.

Of the total portfolio, 32 per cent is from NBFC-MFIs, whereas Banks and SFBs together contributed to 59 per cent of the portfolio. Sa-Dhan said. “The year on year growth of the portfolio is 38 per cent for NBFC-MFIs whereas the Banks’ growth is 24 per cent and SFBs’ portfolio has grown 34 per cent.

NBFC-MFIs have grown loan accounts by 26 per cent and average ticket size by 9 per cent, the report said.

The year on year growth of loan outstanding in FY 2019-20 was 31 per cent, substantially lower than the growth of 41 per cent observed in FY 2018-19.

The decline in growth rate is attributed to natural disasters that wreaked havoc in Odisha, Kerala and Bengal and, the spread of misinformation and false rumours by vested interest political groups in certain districts of Assam and Karnataka, Sa-Dhan said.

“Historically, vested interest groups have been taking advantage of the vulnerability of the underserved people of the society, especially where microfinance institutions have been doing path-breaking work towards financial inclusion,” the report said.

The average loan outstanding per borrower is an important criterion to understand the general profile of clients borrowing from MFIs.The average loan outstanding for the year stood at Rs18,034, there is a growth of 9 per cent over the previous year because of the average ticket size. Loan size in Southern region is Rs27,977 followed by West at Rs24,441, the report said.

Further, the average loan outstanding per borrower is an important criterion to understand the general profile of clients borrowing from MFIs.The average loan outstanding for the year stood at Rs18,034, there is a growth of 9 per cent over the previous year because of the average ticket size. Loan size in Southern region is Rs27,977 followed by West at Rs24,441, the report said.

The rural clientele share marked a sharp jump to 77 per cent. Reasons for a sharp jump in rural share in 2019-20 is because of some large MFIs who reported zero growth in 2018-19 but reported their rural share above 90 per cent in 2019-20, the report said.

During 2019-20, loan disbursement decreased by Rs3,400 crore to Rs1,06,404 crore over the previous year accounting for a 3 per cent decrease, the report said, adding there were no microfinance operations during last 15 days of March 2020 because of COVID-19 pandemic.

Total disbursement of the sector could have increased over previous unless microfinance operations had not been affected. Out of total disbursement, Rs71,465 crore has disbursed by 14 MFIs with a portfolio size above Rs2000 crore, the report said.