MFI industry's full recovery hinges on better liquidity

After witnessing quarters marked by liquidity stress, rising delinquencies, and slowing disbursements, India’s microfinance industry appears to be showing early signs of revival, said leaders and analysts during a panel discussion on the micro lending sector at the Business Standard BFSI Summit.

- BS REPORTER

In panel discussion moderated by Manojit Saha of Business Standard, industry experts said that the worst may be behind the microfinance institutions (MFIs), but the full recovery hinges on improved liquidity support from banks and the government.

“Now the situation is better. We have requested the government to institute a larger guarantee fund of say %20,000 crore, which will kick-start the virtuous cycle of funding, giving confidence to the bank,” said Alok Misra, chief executive officer (CEO), ‘Microfinance Industry Network (MFIN).

“So, that is under active consideration, we hope that can be expedited, and if that happens, things will get better. It is already normal, the momentum will be sustained,” he said.

Sadaf Sayeed, CEO, Muthoot Microfin, said disbursements have improved, affordability of rural households has gone up, and collections also improved.

“I think the inflation has gone down and the crop has been really good, with rains being good. Due to which prices of vegetables or crops have also gone down, increasing the affordability of the rural household. Personally, we are witnessing better collections and better disbursements. Therefore, the trend is towards the positive,” he said.