India Ratings and Research (Ind-Ra) said on Monday that collections for microfinance institutions (MFIs) and small finance banks (SFBs) are estimated to have declined 3 to 5 per cent in April and additional 5 to 7 per cent in first fortnight of May on a month-on-month basis.
The agency expects the overall microfinance sector to witness a shortfall of 10 to 15 per cent in collections on a consolidated basis this month. The variation among MFIs can be wider, depending on their level of concentration in regions where lifting of Covid lockdown restrictions is slow.
Ind-Ra said MFIs can again see credit costs in the range of 3 to 6 per cent in FY22 if early trends of collection performance persist.
In the first Covid wave, rural portfolio was impacted to a lesser extent than urban portfolio and thus saw a faster recovery as disbursements also recovered especially in 2H FY21.
Ind-Ra said smooth access to funding and liquidity will be critical for the sector. For most large MFIs (assets under management above Rs 5,000 croreor MFIs that are part of large groups), bank funding lines can continue and hence they may not face immediate liquidity stress.
But mid and small MFIs can face challenges in fund raising and borrowing costs. The agency reiterated a stable outlook for large MFIs and a negative outlook for the rest for FY22.
( With inputs from ANI )
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