In an article entitled ‘MFI’s bad loans may triple: Crisil’ on India’s Business Standard online news portal [1], it was stated that the percentage of bad assets of MFIS’ is expected to triple to 1.5 percent from 0.5 percent by March 2010, as compared to the levels of bad assets in March 2009.This was the conclusion of India-based credit rating agency, Crisil. The agency attributed the increased levels of deteriorating assets to the global economic crisis which has had an adverse impact on microborrowers’ ability to repay their loans. Nonetheless, Crisil’s managing director and CEO, Ms Roopa Kudva stated that the deterioration in asset quality was still not at the levels seen in 2007 and that MFIs’ asset quality was generally healthier than those of other participants in India’s financial sector.
Ms Kudva added that the deterioration in asset quality largely coincided with the downturn in economic activity and that MFI customers, who often belong to the most vulnerable segments of society, felt the impact of the downturn most acutely and almost immediately due to economic dislocation.
Furthermore, Crisil expects the number of borrowers serviced by MFIs to increase from 21 million in March 2009 to 35 million by March 2011. Mr Ramraj Pai, a director at Crisil, was quoted as stating that the demand for funds in India’s microfinance sector is approximately USD 60 billion although actual disbursements currently only amount to about USD 6 billion. The potential for growth is significant and demand will continue to outstrip supply for a long time as ‘only 10 percent of the market has been penetrated’, Mr Pai observed.
At the moment, banks in the private sector account for the bulk of funding to MFIs in India. Such lenders dominate 45 to 50 percent of the MFI funding sector. Public sector banks contribute about 15 to 20 percent of the funding required by MFIs. Mr Pai was also quoted as stating that alternative sources of funding need to be found.
Ms Kudva and Mr Pai made these observations at the release of Crisil’s publication, ‘Top 50 Microfinance Institutions in India’, in Mumbai recently [2]. The publication gives an overview of leading MFIs in India. Related Microcapital.Org publications on the current state of the Indian microfinance sector and Crisil have been set out in the Bibliography section below [3] – [6].
[1] Article entitled ‘MFI’s bad loans may triple: Crisil’ on India’s Business Standard online news portal: www.business–standard.com/india/…bad–loans…crisil/372886/
[2] Article entitled ‘Crisil releases Top 50 Microfinance Institutions in India’: http://www.domain-b.com/finance/rating/CRISIL/20091008_microfinance.html
Similar Posts:
- MICROCAPITAL BRIEF: Cresol Baser of Brazil Borrows $12m from Huruma Fund for Farm Lending, Green Product Development, Impact Measurement
- SPECIAL REPORT: Partner with Agents for Impact, and We’ll Drive Impact Together!
- MICROCAPITAL BRIEF: Abler Nordic Leads $10m Equity, Debt Investment Round for Ergos, Agtech Offering Crop Storage in India
- MICROCAPITAL BRIEF: Bank of Maldives Borrowing $40m from ADB, JICA, OeEB, for Blue Economy, SMEs, Tourism
- MICROCAPITAL BRIEF: Svasti of India Raises $5m via Impact Investment Exchange (IIX) Women’s Livelihood Bond Issue