Much of the loans were part of the assistance offered by banks under the secured emergency line of credit program to help borrowers overcome the exceptional situation caused by Covid. According to the Microlend report released by the CRIF High Mark credit bureau, the microfinance industry grew 6.4% year-on-year in December 2020.
Urban and rural markets experienced nominal quarterly growth of 0.6% and 1.7% respectively. There was a trend reversal from the first two quarters of the year. Compared year on year, the rural portfolio increased by 8.4% compared to December 2019, while the urban portfolio grew much more slowly to 3.8%.
Banks remain the largest microfinance lender at 41.8%, followed by microfinance institutions of non-bank finance companies (IMF NBFC) at 31.8% of the gross loan portfolio (GLP) and small finance banks at 16.9% in December 2020. Banks and NBFC MFIs experienced quarterly portfolio growth of 1.2% and 4.6% respectively at the start of December. Stimulated by Covid relief programs offered by banks to existing borrowers, the share of disbursements on loans below 10,000 rupees rose 11% from the previous quarter with a jump of almost 24% for banks alone. Small borrowers continued to face financial strains with early defaults 6% above pre-pandemic levels. However, there is a marginal improvement in the stress situation from the second trimester against 7% compared to the previous trimester.
The top 10 states retained 83% of national BPL as of December 2020. The regional distribution of the microfinance portfolio remained largely consistent with the previous quarter, with the eastern region dominating the market with a share of (34.1%) , followed by the south (26.1%), west (14.6%), north (10.6%), center (7.9%) and northeast (6.7%).
The quarterly growth of national BPL is largely attributable to the central region (4.1% quarterly). The northern, western, eastern and southern regions experienced slightly lower quarterly GLP growth starting in December.