Microfinance lending shows strong growth in 2022, NBFC MFIs dominate the market

• Average balance per account witnessed quarterly growth of 0.8% and grew 5.2% Y-oY as of December 22, 2023.
  
• The top 10 states constituted 84.6% of the gross loan portfolio as of December 2022.
  
• Portfolios of ticket size ₹50,000-₹75,000 witnessed Y-o-Y growth of 45%.

The growth in microfinance lending in the rural market outpaced that of urban markets according to data from CRIF High Mark. While rural markets grew 23.8% annually as of December 2022, the same in urban markets was at 14.6%.

The Indian microfinance lending sector witnessed a quarterly (September to December) growth of 5.5% and an annual growth of 20% as of December 2022, says the quarterly publication MicroLend by CRIF High Mark.

This sector’s live customer base grew by 4.8% and 11.9%, on a quarterly and annual basis, respectively.

Average balances and lender exposure

In December 2022, there was a quarterly growth of 0.8% and a year-on-year growth of 5.2% in the average balance per account, while the average balance per borrower saw a quarterly growth of 1% and a year-on-year growth of 8.5%.

Additionally, the report shows that 5.9% of borrowers have dealings with four or more lenders. Among the major states, Tamil Nadu has the highest proportion at 10.6%, while West Bengal has the lowest at 1.5%.

How the geographical regions fare

As of December 2022, the gross loan portfolio (GLP) of the top 10 states accounted for 84.6% of the total. Uttar Pradesh, Bihar, and Karnataka experienced the highest quarterly growth rates of 11.1%, 9.0%, and 7.5%, respectively.

The average balance per borrower for the top states Tamil Nadu, Bihar, and West Bengal was ₹53,600, ₹54,000, and ₹44,200, respectively. In terms of regional dominance, the microfinance sector was led by the Eastern region at 32%, followed by the South at 27% as of December 2022.

Portfolio: Lender type mix

As of December 2022, NBFC microfinance institutions (MFIs) dominate the market with a portfolio share of 35.7%. NBFC MFIs saw a Q-o-Q growth in gross loan portfolio (GLP) of 7.5%, which is significantly higher than the 1.5% for banks and 5.6% for small finance banks (SFBs).

In terms of year-on-year growth, NBFC MFIs had a growth of nearly 28.2%, while banks had a growth of 6.2% and SFBs had a growth of 17.5%.

Loans with ticket sizes ranging from ₹30,000 to ₹50,000 accounted for 47.8% of NBFC MFIs' portfolio, as compared to 38.4% for banks and 49.7% for SFBs.

Portfolio: Ticket size mix

The data indicates an increase in loans with higher ticket sizes. Portfolios with ticket sizes ranging from ₹50,000 to ₹75,000 saw a year-on-year growth of 45% and a quarterly growth of 9.6% as of December 2022.

However, portfolios with ticket sizes greater than or equal to ₹15,000 witnessed a year-on-year decline of 27.2% and a quarterly decline of 2.4%. The share of portfolios with higher ticket sized loans of greater than ₹50,000 increased from 31.8% in December 2021 to 35.2% in December 2022.

Moreover, as of December 2022, loans with a ticket size ranging from ₹30,000 to ₹50,000 had the highest share in both value (45%) and volume (42%). The share of loans with a ticket size between ₹50,000 and ₹75,000 increased from 18% in December 2021 to 22% in December 2022.

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