Comprehensive Pack

Microfinance

1
• Overview :3

• Business Models : 15

• Key success Factors : 24

• Risks : 29

• Market Share Analysis : 37

• Source and Purpose of Loans : 44

• Farm Loan Waiver and Asset Quality : 52

• Costs and Profitability : 58

• Outlook : 63
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 Overview

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Specialised focus and in-depth customer knowledge to aid NBFC-MFI
portfolio growth; SFBs to slowdown

Source: MFIN, Crisil Research

4
Microfinance and micro-credit: Grounds and limit
• The term ‘microfinance’ refers to small-scale financial services, both credit and savings,
offered to ’eligible’ borrowers (annual income bracket of up to Rs 100,000 for rural
households and up to Rs 160,000 for urban and semi-urban households) in rural, semi-
urban, and urban areas.
• It includes a host of services such as savings account, insurance and micro-credit.
Microfinancing aims to help the under-privileged in undertaking economic activity,
smoothening consumption and mitigating vulnerability to income shocks (in times of
illness and natural disasters), thereby increasing their savings and making them self-
empowered.
• Microcredit is the most common product offering of the microfinance industry.

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Microfinance and micro-credit: Grounds and limit
• It refers to loans of very small amounts to borrowers who typically lack collateral, steady
employment and any verifiable credit history.
• Microfinance in India is synonymous with microcredit; this is because savings, thrift, and
micro-insurance constitute a miniscule segment of this space.
• In India, the average ticket size for microfinance loans is estimated to be Rs 18,964 in
2016-17.
• However, the maximum limit for loan disbursal per eligible person is Rs 100,000 (Rs
60,000 for the first disbursement cycle).

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Microfinance - evolution and growth of India
• The concept of microfinance is not new in India.
• Traditionally, people have saved with and taken small loans from individuals and groups
within the context of self-help to start businesses or farming ventures.
• With a majority of the poor excluded from financial services, microfinance supports the
poor rural people to pay debt and maintain social and economic status in the villages.
• Microfinance is an important tool for improving the standard of living of the poor.

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Introduction to microfinance institutions
• NBFC-MFIs (including SFBs) are the major players in microfinance space in India.
• They are defined as non-deposit taking nonbanking finance companies (other than a
company licensed under Section 25 of the Indian Companies Act, 1956) with minimum
net owned funds of Rs 50 million (for NBFC-MFIs registered in the north-eastern region
of the country, it is Rs 20 million) and having not less than 85% of net assets as
“qualifying assets.” Qualifying assets for NBFC-MFIs mean non-collateral loans given to
eligible borrowers.
• Other players who extend microfinance services, in addition to their core businesses,
include banks and insurance companies, agricultural and dairy co-operatives, corporate
organisations such as fertiliser companies and handloom houses and the postal network.

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MFIs took off after 2000, growth moderated in 2016-17 post
demonetisation
• During the initial phase, non-governmental organisations (NGOs) providing credit to
SHGs were the primary channel for microfinance in India.
• The spread of SHGs across the country and the formation of SHG federations, such as the
Mandal Smakhya in Andhra Pradesh, further propelled the industry's growth.
• In 2000, when the RBI allowed banks to lend to MFIs and treat it as part of priority sector
obligations, credit flow to the sector increased substantially.
• It led to the emergence of a highly
• heterogeneous group of companies, comprising private entities, NGOs, trusts, societies
and Section 25 companies, operating through different business models.

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MFIs took off after 2000, growth moderated in 2016-17 post
demonetisation
• The sector received a further impetus when banks entered into partnerships with MFIs,
who acted as agents for disbursement and collection of microfinance loans to individuals.
Securitisation offered MFIs an alternate funding route, apart from the traditional channel
of bank finance.

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Assets under management growth for MFIs in India

Source: MFIN, Crisil Research

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Assets under management growth for MFIs in India
• Andhra Pradesh crisis of 2010 had a lasting impact on the industry.
• Some players had to undertake corporate debt restructuring and found it difficult to
sustain their businesses.
• Since then, however, no other event has affected a complete state to such a degree.
• While demonetization of Rs 500 and Rs 1,000 denomination banknotes in November
2016 hurt the industry, the impact was nowhere as serious as the Andhra Pradesh crisis
and remained limited to certain districts.
• Portfolio at risk (PAR) data as of Q4FY18 indicates that the industry is recovering from
the aftermath of demonetization.
• The collections experience of loan disbursements since January 2017 has been healthy.

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MFIs’ maximum exposure for agricultural activities, followed by trading
and services activities (FY18)

Source: MFIN, Crisil Research

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MFIs’ maximum exposure for agricultural activities, followed by trading
and services activities (FY18)
• The product-wise exposure of MFIs shows that most of the share of the total loan
portfolio is in non-agri activities that are a part of income generation loans, and which
include trading and manufacturing activities.
• However, the share of agricultural-based borrowing has increased significantly and now
accounts for nearly 50% of the overall borrowings in FY18.

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 Business Models

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Flowchart - Lending mechanism via different MFI operating models

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‘For-profit' entities operate using the Grameen model
• MFIs may take the form of either ‘for-profit' or ‘not-for-profit' entities.
• While the former usually follow the 'Grameen' model of lending to joint liability groups
(JLGs), the latter generally lend to self-help groups.
• JLGs comprise 5-7 members, where even if the loan is extended to an individual
borrower, the entire group is collectively responsible for the liability.
• In contrast, under the selfhelp group model, the loan is disbursed to the group, which
then decides whom it has to lend to within the group and the interest rate at which the
loan is to be extended.

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For-profit MFIs dominate industry in India
• MFIs in India can be broadly classified into for-profit and not-for-profit MFIs.
• Further, after RBI released guidelines for MFIs in 2011, for-profit MFIs were to function
as microfinance non-banking finance companies (NBFC) while not-for-profi institutions
could operate through trusts or Section 25 companies.
• NBFC-MFIs dominate the Indian microfinance industry.

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Break-up of loans outstanding for MFIs, classified based on their legal
structure – FY18

Source: MFIN, Crisil Research

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Break-up of loans outstanding for MFIs, classified based on their legal
structure – FY18
• MFIs can also be classified on the basis of their operating structure, depending on
whether they lend to joint liability groups (JLG), also known as the Grameen model, or
self-help groups (SHG).
• Under the JLG lending model, the primary task is to identify a prospective village, based
on parameters such as total population, total income, and population of poor individuals.
• Subsequently, potential members (usually women) are identified, based on factors such
as total household income and number of members in the household.
• These candidates are then organised into groups of 5-7 members each and 3-5 such
groups come together to form a centre; the amount is lent to an individual borrower.

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Break-up of loans outstanding for MFIs, classified based on their legal
structure – FY18
• In the event that the individual borrower defaults on payment, the concept of social
collateral comes into play, and the other group members repay the loan amount due.
• In case of a default, the group is blacklisted and deemed ineligible to receive further
loans from any MFI.
• This model ensures that the individual borrower is subject to constant peer pressure that
urges him/her to make timely repayments.
• In the JLG model, at least 90% of group members need to be present during loan
disbursal.

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Individual microlending
• Individual micro lending by NBFC-MFIs is basically to tap new markets and improve
reach by serving the underserved customer segment with better margins in overall
lending.
• As of now, individual lending is a fresh concept for MFIs and there is no proper model
available with them to lend in this segment in a planned way.
• However, many MFIs have started targeting such customers with specific needs for their
various ventures.
• The portfolio for individual lending varies from 10-15% of total outstanding loans, for
most MFIs.
• As per RBI guidelines, MFIs can charge higher

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Individual microlending
• As per RBI guidelines, MFIs can charge higher rate of interest on individual loans,
which can improve their margins; the rate of interest on individual loans may exceed
26%, but the maximum variance permitted for individual loans between the minimum
and maximum interest rate cannot exceed 4%.
• The average interest paid on borrowings and charged by the MFI is to be calculated on
average monthly balances of outstanding borrowings and loan portfolio, respectively.

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 Key Success Factors

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Key success factors
A geographically diversified portfolio helps MFIs mitigate risks
• Given that MFIs' fixed operating cost is relatively high, considering the value of the loan
amount, the scale of operations is a crucial factor for them. First, a large, well-diversified
portfolio in different geographies enables players to mitigate risks associated with a
concentrated portfolio.
• Apart from this, having a wider scale of operations helps them cut down operating
expenses as a percentage of outstanding loans.

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Key success factors
Technology to be major enabler for MFIs to monitor portfolios and
maintain asset quality
• Apart from the costs and benefits arising from automated documentation processes,
having a robust back-end technological setup enables players to effectively monitor their
loan portfolios.
• Technology is also likely to play a major role in preventing internalaccounting lapses and
facilitate a better monitoring mechanism for collections.

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Key success factors
Credit risk mitigation by credit bureaus
• Credit bureaus such as Equifax and Highmark are engaged in collecting data from several
MFIs and building a comprehensive database that captures the credit history of
borrowers.
• These databases are updated on a weekly basis. But there is lack of availability of data
from banks on self-help group (SHG) borrowers.
• The integration of the MFI credit bureau and CIBIL databases will further strengthen
credit assessment of borrowers.

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Key success factors
Managing local stakeholders - key determinant of MFIs' success
• Considering the sensitive nature of operations, MFIs must ensure that their activities do
not antagonise local leaders and government authorities.
• Apart from adherence to legal and regulatory guidelines, maintaining amicable relations
with stakeholders in their respective geographies is a key determinant of MFIs' success.

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 Key Risks

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Key risks for the MFI industry
• Microfinance institutions (MFIs) are exposed to a unique set of risks and
challenges, because of their business model and the nature of customer
base.
Exposure to low-income households raises MFIs' vulnerability to political intervention
• MFIs typically lend to low-income households, living in rural and semi-urban areas,
which are extremely sensitive to political intervention.
• These households do not have financial savings to rely on in case of personal
emergencies and medical crises, making them vulnerable to volatility in their cash flows.
• Exposure to this section of society makes MFIs vulnerable to inherent political actions,
in case their activities are viewed to be detrimental to social interests.
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Exposure to low-income households raises MFIs' vulnerability to political intervention

• The impact of the Andhra Pradesh Ordinance, which aimed to address the alleged
coercive collection practices used by MFIs operating in the state, reflects this risk.
• The RBI guidelines have provided a uniform operating framework for NBFC MFIs
across the country.
• However, in addition to complying with these guidelines, MFIs also have to ensure that
their practices align with 'accepted' norms as per the respective state and local
governments.

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Natural calamities could impair borrowers' repayment ability
• Natural calamities, such as droughts and floods, pose a major threat to MFIs.
• As agriculture forms a source of livelihood for majority of the rural population, either
directly or indirectly, natural calamities could adversely impair the repayment capabilities
of these borrowers.

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Cash-in-transit losses
• Cash is the most widely used channel for a majority of transactions between MFIs and
borrowers.
• This leads to the risk of borrowers losing cash in transit (either due to fraud or theft by
third parties) at the time of repayment, a key concern for MFIs.
• While some players have opted to transfer this risk to borrowers, others have sought
cash-in-transit insurance.

Inadequate monitoring mechanisms pose a risk for MFIs

• Given the nature of their business, MFIs require robust monitoring mechanisms, both prior
to lending and later, to ensure timely collections.
• Simultaneously, they also need to control operational expenses, given the small ticket size
of loans.
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 MFIs with concentrated portfolios face local political and event-related
risks
• The risk of adverse local government policy is magnified for players with concentrated
portfolios in certain geographies.
• Lack of geographical diversification further exposes these players to event risk, in the
form of droughts, floods and other natural calamities, which could severely impair the
repayment capacity of borrowers and groups in the affected regions.
• Nevertheless, it is worthwhile mentioning here that several smaller MFIs with an
established local presence in certain districts or states have enjoyed strong collections
over a considerable duration of time.

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Players converting into SFBs to face the risk of timely meeting stringent
regulatory norms and expected decline in profitability and market share
• Players turning into small-finance banks (SFBs) will face major challenges in terms of
meeting the stringent regulatory norms applicable to banks.
• Most players, which have won SFB licences, have high foreign holdings, but have to
raise a high amount of domestic equity to reach the minimum domestic holding
requirement to comply with the norms.
• Also, players with SFB licences have to expand their overall reach by opening up new
branches, hiring new staff and implementing technology to streamline the overall
process and any additional work pressure.
• Hence, the conversion into an SFB will increase their overall operating cost and have a
negative effect on their profitability.
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Players converting into SFBs to face the risk of timely meeting stringent
regulatory norms and expected decline in profitability and market share
• As players converting into banks will have to focus on the liability-side products as well
to build a portfolio, their business growth in the microfinance sector may be impacted;
in turn, other NBFC-MFI players may have a chance to take advantage of the situation
to gain market share.

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 Market Share Analysis

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Banks-SHG linkage model accounts for a sizeable proportion of the
overall pie
• Microfinance in India comprises of two major business models: Joint Lending Group
(JLG) model, as used majorly by different player-groups, and Self-help Group (SHG)
Model, used primarily by banks to disperse microfinance loans.
• Under JLG model, a potential village is identified based on certain characteristics such
as village income, overall population, health status etc.
• Post the identification, potential candidates to whom loans can be dispersed are
identified based on parameters such as overall household incomes, number of members
in the household etc.

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Banks-SHG linkage model accounts for a sizeable proportion of the
overall pie
• After this, these individuals are segregated into group of 8-10, and 5-7 such groups are
formed.
• Loans are dispersed to a single individual in the group. In case the borrower defaults on
the loan, the entire group is blacklisted, implying the importance of peer pressure to
ensure asset quality in this model.
• On the other hand, under SHG model, the members (usually groups of 15-20 people)
contribute small amounts on a regular basis, to build up base capital, through which
lending operations commence.

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Banks-SHG linkage model accounts for a sizeable proportion of the
overall pie
• Once credit history is established within the group, the SHG is linked with banks on
• the back of this credit history through which microfinance loans are dispersed to the
members.
• While JLG model has been in use for microfinance loans widely, SHG loans (given out
primarily through banks) account for ~35%
• of loans given out as of fiscal 2018. Going forward, the fast-paced growth from NBFC-
MFIs and Banks (JLG) to drive loan growth for the JLG model, as a result of which,
SHG loans might marginally lose share in the overall pie.

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As of fiscal 2018, Banks through JLG and SHG models provide most
microfinance funding in the economy

Source: MFIN, Crisil Research

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Large players converting to SFBs has changed the industry landscape

• The RBI awarded in-principle SFB licenses to 8 MFI applicants on September 16, 2015.
• All the MFI applicants have received final approval from RBI to start operations.
• These MFIs cumulatively accounted for ~19% of the total gross loan portfolio for the
JLG industry, as of second quarter of fiscal 2019.

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Erstwhile NBFC-MFIs which converted to Small finance banks still form
a sizeable chunk of the pie

Source: MFIN, Crisil Research

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 Source and Purpose of
Loans

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Purpose of loans remains tilted towards income generation
• The majority of loans issued by MFIs are meant for income-generating activities.
• The share of income-generating loans declined from 91% in FY13 to 80% in FY14 and
remained constant in FY15.
• However, the share increased in FY16, scaling 94% and dipped to 85% in FY17.
Agriculture, animal husbandry and trading are the major income-generating activities
for which MFIs grant loans.
• Around 15% loans have been provided for non-income generating activities, including
loans for consumption and housing, in FY17.

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Income-generation loans account for 85% of loans

Source: MFIN, Crisil Research

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Term loans make up a majority of MFI funding mix; securitisation
gaining traction
• Traditionally, credit from banks has been the mainstay for MFIs.
• While this remains so, RBI guidelines and greater focus of players on credit quality will
change banks' perspective on funding MFIs, going forward.
• MFIs are also expected to aggressively tap the securitisation route for a low-cost
funding alternative.

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Banks likely to remain main financiers; funding from MUDRA to lower
cost of Fund
• Traditionally, banks have been the primary source of funds for MFIs.
• They lent funds to these institutions to meet their priority sector lending requirements.
• Apart from bank funding, securitisation of receivables offers an alternate funding route
for MFIs.
• Besides above mentioned two modes, capital market instruments like issue Of
debentures and commercial papers offers alternate funding routes for MFIs.

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Banks likely to remain main financiers; funding from MUDRA to lower
cost of Fund
• The rise in funding via the securitisation route owes its growing popularity with the
implementation of the Reserve Bank of India (RBI) guidelines following the Andhra
Pradesh (AP) ordinance , which improved the risk perception towards the microfinance
sector.
• During FY 2018, share of securitisation had increased to 28% in over all funding from
14% as compare with the previous year.
• Slowdown in growth of MFIs, increased risk perception on account of demonetization,
slower bank credit growth (banks invest in securities to fulfill their priority sector
requirements) and conversion of some large players into SFBs had reduced the overall
share of securitisation to 14% in FY17.
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Term loans make up a majority of NBFC-MFI funding mix; securitisation
gaining traction

Source: MFIN, Crisil Research

50
MUDRA to reduce average cost of fund for MFI players
• The setting up of Micro Units Development & Refinance Agency Ltd (MUDRA) is a big
positive for the microfinance sector, as it provides funding and liquidity support to MFIs.
• The aggregate funds given to MFI players were ~Rs 425 billion, as of March 2017.
• As the funding is at a comparatively lower rate, the overall average cost of funds for the
MFI industry has reduced marginally.
• The benefit to small players is considerable compared with large players.

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 Farm Loan Waivers and
Asset Quality

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Spillover effect from farm loan waivers to affect asset quality in the
segment
• Introduction of credit bureaus and guidelines issued by the RBI have helped improve
asset quality of MFIs through greater focus on credit assessment and better monitoring
of borrower indebtedness.
• However, post the farm loan waiver announcements, asset quality is expected to worsen.

53
Spillover effect from farm loan waivers to affect asset quality in the
segment
• Portfolio at risk (PAR) is the primary indicator of risk for the sector, and it equals the
percentage of loans overdue.
• PAR value increased sharply in FY17 due to non-availability of cash and slowdown in
business activities of individuals after demonetisation.
• However, MFIs invested heavily in educating borrowers and helping them exchange old
notes which improved borrowing efficiency.

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PAR 30 and PAR 90 improving as the effects of demonetization subside

Source: MFIN, Crisil Research

55
PAR 30 and PAR 90 improving as the effects of demonetization subside
• Implementation of RBI guidelines on lending and greater co-operation amongst MFI
players in sharing data with credit bureaus partly limit the risk of over-leveraging of
borrowers.
• The credit bureau data presently does not capture loans availed of by borrowers through
SHG-BLP and on-book lending by banks through business correspondents.
• Therefore, over-leveraging of borrowers remains a key concern.
• Nevertheless, inherent strengths of the operating model such as peer pressure exerted by
JLG and regular engagement with borrowers, and enhanced usage of technology in
portfolio monitoring and tracking are measures to ensure that asset quality remains under
control despite rapid growth.

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PAR 30 and PAR 90 improving as the effects of demonetization subside
• PAR value has started to improve over the quarters, coming down to 1.9% (PAR>90 in
quarter two of fiscal 2019) as a result of the initiatives of the lenders, and inherent model
strength.
• However, going forward, asset quality to worsen given the announcement of farm loan
waivers in multiple states (Rajasthan, Chhattisgarh, and Madhya Pradesh).
• It is important to note that these waivers don’t directly hurt the industry credit discipline,
as they are provided on banking sector loans majorly.
• What might hurt the asset quality in the microfinance segment is when the borrowers
who have taken over microfinance loans also start demanding for waivers for smaller
ticket sized microfinance loans.

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 Costs and Profitability

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Profitability for the industry to improve in near term based on stability in
business operations
• The RBI's move to cap MFIs' gross margin and lending rate have forced players to alter
business models.
• some of the major players with the small finance bank license are also into the expansion
mode, which is increasing the operating expenses for the industry.
• Lower growth in loan portfolio, higher credit cost and increase in collection efforts on
account of demonetisation impacted the profitability of players in the previous financial
year.
• Going forward, credit costs are expected to remain elevated, affecting the profitability
for NBFC-MFIs and the industry as a whole.

59
Profitability for the industry to improve in near term based on stability in
business operations
• Profitability plunged in FY18 primarily based on Small Finance Banks adapting to the
newer business models and incurring heavy operating and credit costs.
• For instance, the biggest player in the SFB domain, witnessed a RoA of -20.3% in FY18
as against 1.3% in FY17 as to how it curtailed the disbursements for the fiscal to
improve collection efficiency.
• The inability to ramp up disbursements affected the overall loan book and the interest
income.
• As the provisioning on the assets increased, they incurred heavy losses on the overall
portfolio.

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Profitability for the industry to improve in near term based on stability in
business operations
• The other remaining MFIs witnessed improvement in profitability levels based on
reducing credit costs, improving gross spreads and better collection efficiencies.

61
NBFC-MFIs profitability expected to come under pressure based on
increasing interest rates and operating expenses

Source: Company Reports

62
 Outlook

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 Industry remains resilient despite headwinds
• The microfinance industry, especially in India, has been a strong enabler in including the
financially underserved and unserved in the formal financial ecosystem.
• Industry credit growth for NBFC-MFIs and Banks to remain strong going forward, while
that for SFBs is expected to come down sharply.
• Asset quality might worsen as a result of farm loan waiver announcements, which might
hurt the credit discipline of borrowers.
• Profitability, on the other hand, is expected to worsen for NBFC-MFIs while stabilisation
in business operations is expected to aid SFBs.

64
 Industry remains resilient despite headwinds
• Microfinance credit for NBFC-MFIs at 28-30% CAGR growth till fiscal 2020 and 11-13%
CAGR for Small Finance Banks till fiscal 2020 as NBFC-MFIs gobble up market share
based on their strong customer connect, and rural penetration with small finance banks
slowing down, as they move towards other retail products..
• Overall industry size is expected to reach Rs. Rs. 2.21 trillion by fiscal 2020, driven by
strong growth in microfinance portfolio for banks and NBFC-MFIs.

65
Asset quality to get impacted by farm loan waivers

• Portfolio at Risk (PAR) value increased sharply in 2016-17 due to non-availability of cash
and slowdown in business activities of individuals after demonetisation and farm loan
waivers in Uttar Pradesh, Punjab, Maharashtra and other states.
• However, due to lenders' action in guiding the borrowers towards repayment and inherent
Joint Lending Group peer pressure has ensured this comes down to 1.9% (PAR>90) from
5.9% levels post demonetisation.
• However, going forward, asset quality to get impacted as a result of farm loan waiver
announcements in Madhya Pradesh, Rajasthan and Chattisgarh which is expected to feel
the spillover from the announcements and see decline in their credit discipline.

66
Profitability for SFB to improve by fiscal 2020; NBFC-MFIs to see RoA
contraction
• As a result of elevated credit costs, and higher costs of borrowing, NBFC-MFIs are
expected to witness RoA contraction by ~15-20 bps in fiscal 2019, and further by ~5-10
bps in fiscal 2020.
• Small Finance Banks, on the other hand, are expected to RoA improvement as their
business operations stabilise post conversion.
• Industry profitability is expected to improve by ~25-30 bps in fiscal 2019, and further by
~45-50 bps in fiscal 2020, as a result of improvement in small finance banks operations,
despite elevated credit costs post the waiver announcements.

67
Despite headwinds, microfinance industry has shown tremendous growth
• The microfinance industry is expected to grow at a fast pace over the next two fiscals till
FY2020 post the aftermath of demonetisation along with RBI's new regulations and some
large MFIs converting into small finance bank.
• Buoying the sector are return of lender and investor confidence and geographic
diversification by players.

68
 Despite headwinds, microfinance industry has shown tremendous
growth
• Combined Joint Lending Group (JLG) portfolio of microfinance player groups (NBFC-
MFIs, SFBs, Banks, NBFCs and Non-profit MFIs) grew at a strong 51% YoY in the
second quarter of fiscal 2019, to reach Rs. 1.53 trillion.
• This growth was clocked despite multiple issues faced by the industry including events
like Andhra Pradesh crisis in fiscal 2010, the Andhra Pradesh farm loan waivers in fiscal
2014, demonetisation, and farm loan waivers spillovers in multiple states in fiscal 2017
and 2018 respectively, along with the current liquidity squeeze in fiscal 2019.

69
 Despite headwinds, microfinance industry has shown tremendous
growth
• Add to this, conversion of large players such as Janalakshmi, Ujjivan and Equitas and 5
others into Small Finance Banks (SFBs) hurt the growth as they looked to diversify into
complementary retail products.
• Despite these developments, the industry has remained resilient, evidenced by the strong
growth seen over the quarters.
• As a result of the liquidity squeeze post IL&FS default, small-sized NBFC-MFIs are
expected to feel the brunt, in terms of fundraising abilities which, in turn, is expected to
lead to slower growth in microfinance portfolio for NBFC-MFIs and industry going into
fiscal 2019

70
 Despite headwinds, microfinance industry has shown tremendous
growth
• However, the situation is expected to improve and NBFC-MFIs share in expected to
decline marginally to 27% by the end of fiscal 2020.
• Overall industry size is expected to grow at a healthy pace driven by opportunity
available with the financiers to capture market share from unorganized lenders.
• This coupled with increasing rural and regional penetration and increasing efforts of the
players on marketing and digitization is expected to raise awareness among different
segments of the population which is, in turn, expected to drive growth for the players
going into fiscal 2020.

71
 Despite headwinds, microfinance industry has shown tremendous
growth
• Microfinance JLG portfolio to grow to Rs. 2.21 trillion by fiscal 2020, with strong growth
from NBFCMFIs (despite slowdown post IL&FS default) and Banks while Small Finance
Banks relook their portfolio strategy and reduce their overall microfinance exposure to
target complementary retail products.

72
NBFC-MFIs and Banks to drive growth in microfinance portfolio going
into fiscal 2020

Source: Company Reports

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