The India-based Information and Credit Rating Agency (ICRA) recently conducted a study of 21 microfinance institutions (MFIs), finding “better-than-expected collection efficiency in June 2020.” During April and May 2020, the MFIs reported a “cumulative collection efficiency” of approximately 10 percent. This rate rose to a range of 40 percent to 70 percent in June, with rural borrowers involved in agriculture, dairy and allied services exhibiting greater performance than those in other industries.
Reportedly, “the easing of the lockdown restrictions has enabled domestic MFIs to re-establish their connect and convince a large number of borrowers to start paying their instalments as it would be cost-effective for them.” This is despite the Reserve Bank of India (RBI) extending a moratorium on microborrower repayments from May to August.
On average, MFIs’ cash-to-assets ratios remained steady near 10 percent from March 31 to May 31. However, “the ratio for entities in the ‘BBB’ and below rating category was less than half of the ratio for entities in the ‘A’ and above rating category.” Accordingly, many MFIs do not have enough liquidity to cover their operating expenditures between June and September while also satisfying their debt-servicing obligations.
Formerly known as the Investment and Credit Rating Agency of India, ICRA was established in 1991 as a public limited company. Its shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. Moody’s Investors Service of the US is the largest shareholder in ICRA.
By Jessica McLeod, Research Associate
Sources and Additional Resources
Prokerela news release
https://www.prokerala.com/news/articles/a1064683.html
ICRA homepage
https://www.icra.in/
Previous MicroCapital article on ICRA
https://www.microcapital.org/microcapital-brief-icra-raises-rating-for-arohan-financial-services-pass-through-certificates-for-1-4m-securitization-of-microfinance-loans/
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