MFI Portfolio Shrinks 17% in FY24, But Q4 Signals Industry Stabilization

The microfinance institution (MFI) sector in India faced a challenging fiscal year 2024, marked by a significant contraction in total lending volumes. However, emerging data from the March 2024 quarter suggests that the industry may finally be finding its footing after a period of volatility.

A Year of Contraction: The 17% Decline Explained

The microfinance industry experienced a notable setback in FY24, with the total portfolio shrinking by 17% on a year-on-year basis. This contraction reflects the heightened caution among lenders following previous periods of credit stress and regulatory scrutiny. The decline in the overall loan book indicates a cooling period where aggressive expansion was sidelined in favor of maintaining systemic health. Despite this annual contraction, the industry showed a positive sequential trend in the final quarter of the fiscal year, suggesting that the downward momentum has paused.

Shift Toward Existing Borrowers and Higher Loan Sizes

As the industry moves toward stabilization, a distinct shift in lending patterns has emerged. Rather than pursuing rapid customer acquisition through new, untested profiles, MFIs are increasingly focusing on their existing borrower bases. This strategy emphasizes deepening relationships with proven clients who have established credit histories with the institutions.

Accompanying this shift is an upward trend in individual loan sizes. As lenders pivot toward more stable segments, the average ticket size of loans has increased, reflecting a more mature lending approach aimed at providing meaningful capital to reliable borrowers rather than high-volume, low-value micro-loans.

One of the most encouraging signs for the sector is the moderation of borrower leverage across key Indian states. By curbing the tendency of borrowers to take on multiple overlapping loans, MFIs are effectively reducing the risk of over-indebtedness, which was a primary concern in previous cycles.

তবে, সম্পদের গুণমান সংক্রান্ত চিত্রটি এখনও বেশ জটিল। শিল্পক্ষেত্রে ৩০+ দিন অতিবাহিত পাওনা (DPD) হারে একটি পরিমাপযোগ্য উন্নতি দেখা গেছে, যা নির্দেশ করে যে স্বল্পমেয়াদী ঋণ পরিশোধের শৃঙ্খলা স্থিতিশীল হচ্ছে। অন্যদিকে, পুরনো ঋণের কোহর্টগুলোতে (loan cohorts) তীব্র চাপ দেখা যাচ্ছে। এই বৈচিত্র্যটি নির্দেশ করে যে, সাম্প্রতিক ঋণ প্রদান চক্রগুলো ভালো পারফর্ম করলেও, পূর্ববর্তী অর্থনৈতিক চাপের দীর্ঘস্থায়ী প্রভাব পুরনো পাওনার ওপর প্রভাব ফেলছে, যার ফলে ঝুঁকি ব্যবস্থাপনা দলগুলোর সতর্ক নজরদারির প্রয়োজন হচ্ছে।

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