Micro Finance Channel Check - Prolonged Pain Hurting Prospects In The MFI Space: Dolat Capital

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Dolat Capital Report

While the micro finance institution industry has seen several risk events in the past, the Covid-19 crisis is both more prolonged and geographically broad based versus previous events.

In FY21, the industry incurred credit costs of ~4.5-5% on account of first wave (excluding of std provision buffers).

However, even after write-offs of 2- 5% of loans in FY21 across most lenders, we are again seeing a case of sharp uptick in portfolio-at-risk 30 plus for industry on account of the second wave.

Our discussions/data also allude that disbursements over the last few quarters were driven by top-up/emergency/supplementary loans which may have aided credit costs for industry.

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