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MFIs overtake banks in microlending with 40% share
August 25, 2023
After a gap of four years, standalone MFIs overtook banks in microlending in 2022-23 with a 40 per cent share of loans in the country, up from 35 per cent in the last year, according to an analysis.
On the back of recovery after being hit hard during the pandemic when collections and disbursals plunged, MFIs have clawed back from 32 per cent share in FY20, which declined further to 31 per cent in FY21 before improving to 35 per cent in FY22.
As of March 2023, MFIs held a 40 per cent share of the overall microfinance loans, registering a 37 per cent growth, compared to banks’ 34 per cent, down 600 bps from the previous fiscal, Care Ratings said in a note on Wednesday.
Almost all banks have an MFI book as part of meeting their priority lending targets.
Banks controlled 34 per cent of the industry’s Assets Under Management (AUM) in FY23 — down from 40 per cent in FY20 and FY22. Their share had peaked at 44 per cent in FY21.
The microfinance industry grew by 37 per cent in FY23 due to favourable macroeconomic climate and renewed demand, leading to higher disbursements.
Consequently, standalone MFIs have surpassed banks in the overall microfinancing landscape, constituting around 40 per cent of the total outstanding microfinance loans as of March 2023, compared to 34 per cent for banks, Care Ratings said Wednesday in a note.
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