‘Secured assets in low-, mid-income segment to drive next phase of growth’

ESAF Small Finance Bank is sharpening its focus on secured products, aimed at the lowerand middle-income (LMI) segment, as it charts its next phase of growth.

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MD & CEO K Paul Thomas tells Narayanan V that the lender has nearly halved its unsecured book to around 35% over the past year, expanded its loan offerings, and also about the current lending scenario in the microfinance segment. Excerpts:

How is the stress situation in the microfinance segment?

Things are clearly improving on the ground. The two guardrails implemented by the industry have worked well, and almost all entities including banks, small finance banks and microfinance institutions (MFIs) are seeing better collections. However, one concern is that a large number of microfinance customers have moved out of the segment. I am also the chairman of Sa-Dhan, a self-regulatory organisation for MFIs, and we are studying how these borrowers can be brought back into the formal system. In the MFI segment, once a borrower slips into a nonperforming asset category, it becomes very difficult to regularise the account and close the loan. They do not get fresh loans. What generally happens, from what I have seen, is that they move to the informal sector to meet their immediate needs.

ESAF's microloans book has shrunk 24% yo-y to ₹7,583 crore in Q3.