Microlending drops 10% during Covid phase

Recovering debts

• Lockdowns, especially in second wave in mid-2021, had led to a lot of stress in the sector

• Loans unpaid for over 30 days have come down to 10-11% in July 2022, as against a high of 22% at the peak of the devastating second wave of the pandemic

• In FY22, portfolio of 100 lenders including NBFC-MFIs, banks, grew to Rs 2.85 lakh cr

• A study commissioned by the body suggested that, potential mkt size will reach Rs17 lakh cr by FY25

Mumbai: Microlenders suffered credit losses of up to 10 per cent during the two years of the pandemic, but things are improving now with stressed asset levels halving, an industry body said on Monday.

The lenders, which typically disburse unsecured finance for micro entrepreneurs, suffered credit losses of 5-10 per cent in FY21 and FY22 due to the impact of the pandemic on operations and borrowers' financial health, Microfinance Institutions Network's chief executive Alok Misra told reporters.

The exact extent of the credit losses may vary from institution to institution, he added. However, after the ebbing of the multiple waves of the pandemic, things have been improving from a stressed loans perspective, the head of the self-regulatory organisation said. Loans unpaid for over 30 days have come down to 10-11 per cent in July 2022, as against a high of 22 per cent at the peak of the devastating second wave of the pandemic, he said.

It can be noted that lockdowns and/or the spread of the virus, especially in the second wave in mid-2021, had led to a lot of stress in the sector, as collection agents were unable to reach the borrowers spread across the hinterland, and also the income generation suffered for such segments.