MFIs suffered up to 10 pc credit loss in FY21, FY22 due to pandemic
   Date :08-Nov-2022

MFIs suffered 
 
 
 
Business Bureau
Microlenders suffered credit losses of up to 10 per cent during the two years of the pandemic, but things are improving now with stressed asset levels halving, an industry body said on Monday.
The lenders, which typically disburse unsecured finance for micro entrepreneurs, suffered credit losses of 5-10 per cent in FY21 and FY22 due to the impact of the pandemic on operations and borrowers’ financial health, Microfinance Institutions Network’s Chief Executive Alok Misra told reporters.
The exact extent of the credit losses may vary from institution to institution, he added.
However, after the ebbing of the multiple waves of the pandemic, things have been improving from a stressed loans perspective, the head of the self-regulatory organisation said. Loans unpaid for over 30 days have come down to 10-11 per cent in July 2022, as against a high of 22 per cent at the peak of the devastating second wave of the pandemic, he said.
It can be noted that lockdowns and/or the spread of the virus, especially in the second wave in mid-2021, had led to a lot of stress in the sector, as collection agents were unable to reach the borrowers spread across the hinterland, and also the income generation suffered for such segments.
Misra said the new AAP Government in Punjab was toying with some populist ideas to help the borrowers, but the industry has successfully helped to avoid such an outcome by impressing the need to further strengthen credit culture and not weaken it.
A similar attempt was done in Assam as well during the pandemic, but the industry was able to ensure that a complete loan waiver is avoided and instead a dispensation where an asset is restructured is offered, he said.
Misra said overall, the policymakers have understood the importance of credit culture and Microfinance Institutions Network (MFIN) does not see the threat of populism impacting the sector anymore.
In FY22, the overall portfolio of 100 lenders including dedicated NBFC-MFIs, banks who do microlending and small finance banks, grew to Rs 2.85 lakh crore, Misra said.