Barring Assam, microlenders’ collection efficiency improves ‘significantly’ in Q4

Barring poll-bound Assam, microfinance players are seeing a healthy improvement in collection efficiency across all geographies in the fourth quarter compared to the third quarter this fiscal.

In Assam, where voting for Assembly elections will start on March 27 and conclude on April 6, some microfinance players have seen some improvements in their collection efficiency that fell sharply in January this year, while for others it has come to a standstill.

Collection efficiency for all microlenders came down in the north-eastern state after the state Assembly passed the Assam Microfinance Institutions (Regulation of Money Lending) Bill, 2020, in December last year to regulate operations of microfinance institutions (MFIs) and ease stress in the sector, and talks of a possible waiver of microloans ahead of the elections.

Bandhan Bank, a leading microlender of the country, is witnessing an improvement in its collection efficiency in Assam as borrowers have now become increasingly conscious of their credit score. In the state its collection efficiency fell to 78% during the first 16 days of January from 88% at the end of December last year. “Collection efficiency did not drop further. We are witnessing a higher collection now in Assam as more borrowers are coming to repay. They understand that repayment is very important to get a fresh loan,” Bandhan Bank managing director and CEO Chandra Shekhar Ghosh told FE.

For the Kolkata-headquartered lender, collection efficiency in Assam is still below than that of its pan-India trend. Ghosh said collection may further improve in the state after the election is over. The bank’s total micro-credit group loan in the state is around 8% of its total advances. Bandhan’s collection efficiency stood at 90% nationally during the first 16 days of January. From there, it has improved in March, Ghosh informed.

“On a pan-India basis collection efficiency in microfinance may normalise at the end of the first quarter next fiscal, while it is likely to return to the pre-Covid levels by September,” he said. Fresh loan disbursement from Bandhan in the fourth quarter has increased from the third quarter of the current fiscal.

For Ujjivan Small Finance Bank, disbursement numbers have surpassed pre-covid level as its microbanking advances has grown after November 2020. “We have an outstanding principal amount of Rs 9,912 crore till December 2020 which is growing steadily month on month,” said Rajat Kumar Singh, business head of microbanking and rural banking, Ujjivan SFB.

On collection efficiency, Singh said month-on-month it has been showing a positive trend nationally with more customer income coming back to normalcy. “Current efficiency stands at approximately 92% which translates to 101%+, if we include pre-closure and advance collection. Collection efficiency by Q2FY21 end was 83%,” he said.

In Assam, Ujjivan’s collection efficiency has improved in February, compared to January, and the bank expects it to further improve in March. “Our portfolio in Assam is less than 3% and we are currently disbursing only to existing customers there. Though the state has been a challenge since more than a year due to various factors, we expect things to improve from April onwards, once elections are over,” Singh said.

Satin Creditcare Network, one of the leading microfinance companies, said presently its disbursement is stalled in Assam. As on December 2020, it had Rs 409-crore exposure to the state, out of which its on-book portfolio is much lesser. In December, the lender’s collection efficiency stood at 84%, while nationally its cumulative collection efficiency for 9MFY21 was 92%. Around 98% of its clients paid their full instalments in January 2021.

According to Satin Creditcare, collection efficiencies are on an upward trend across all geographies. NPA numbers are improving. Although disbursement is reaching close to pre-Covid levels, the fear of Covid-19 still looms, it added.
Bhubaneswar-based MFI Annapurna Finance is not seeing any improvement in its collection efficiency in Assam from the January levels, while for Kolkata-based Village Financial Services (VFS), it has improved a little bit in the state. For both the lenders, collections have increased significantly compared to the third quarter on a pan-India basis.