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Bengal, Tamil Nadu usurp Andhra as new MFI hubs

While West Bengal and Tamil Nadu account for 14% each of microfinance institution clients, Andhra Pradesh accounts for 13%, according to the MFIN Mircometer Report 2013

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Namrata Acharya Kolkata
Last Updated : Mar 07 2014 | 2:06 AM IST
For the first time, West Bengal and Tamil Nadu have individually surpassed Andhra Pradesh as the largest markets for microfinance loans.

While West Bengal and Tamil Nadu account for 14 per cent each of microfinance institution (MFI) clients, Andhra Pradesh accounts for 13 per cent, according to the MFIN (MicroFinance Institutions Network) Mircometer Report 2013. As of December 2013, the microfinance sector had 26.48 million clients, a growth of 16 per cent over the previous year.

In terms of gross loan portfolio (GLP), Andhra Pradesh with all the bad loans after the repayment crisis in 2010, continues to account for the lion’s share at 15 per cent. Tamil Nadu, too, accounted for 15 per cent, followed by West Bengal, which accounted for 14 per cent.

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A fallout of the geographical churn in the microfinance market has been the stellar growth of mid-sized MFIs outside Andhra Pradesh.

“At present, Andhra Pradesh has zero active client base. Earlier, all large MFIs were based in Andhra Pradesh. Post-crisis, the mid-sized MFIs have emerged really strong, with banks supporting us, too,” said Samit Ghosh, president, MFIN and CEO of Ujjivan.

At present, the total GLP of the MFI sector is Rs 23,997 crore, a growth of 29 per cent over the year-ago period. Notably, the MFI industry now is bigger in size over the pre-crisis period, when the GLP of the industry was close to Rs 20,000 crore.

In the last quarter, states which saw high bank funding include West Bengal, Tamil Nadu, Kerala, Bihar, Assam and Uttar Pradesh.

After a long time, banks, too, are actively lending to MFIs. Small-sized MFIs, with a portfolio of less than Rs 100 crore, saw a phenomenal growth in bank funding, nearly 101 per cent of increase over the year-ago period.

“Earlier, only a few public sector banks were giving loans to the MFIs. This time, a lot many private banks are lending to the MFIs,” said Mathew Titus, executive director of Sa-Dhan.

Only recently did the Reserve Bank of India (RBI) remove a 26 per cent interest rate cap on loans and link the interest rate to the cost of funds. Another major fillip to the microfinance sector has been facilitated by RBI’s decision to accord self-regulatory organisation (SRO) status to the industry association for non-banking financial companies, which are engaged in microfinance.

Over the past six-to-eight months, at least 13 new MFIs have sought membership at the two industry bodies — MFIN (Microfinance Institution Network) and Sa-Dhan.

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First Published: Mar 07 2014 | 12:47 AM IST

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