Microfinance sector hopes to close FY14 with 50-55% growth

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Until December industry had loan portfolio of Rs 27,000 crore

The Indian microfinance industry, which had been facing survival issues until the beginning of last year, now hopes to close the fiscal with a growth of 50-55 per cent in the gross loan portfolio at Rs 30,000 crore, compared to last year. Until the end of December the industry had a loan portfolio of Rs 27,000 crore.

“After the October 2010 crisis, the industry faced several environmental challenges and regulatory headwinds. This resulted in the industry seeing negative growth in 2011-12. However, all that is the past. For the current fiscal, our estimates suggest that the industry GLP will grow to a level of around Rs 30,000, a historic high,” Alok Prasad, chief executive officer, Microfinance Institutions Network, told Financial chronicle.

Even as the picture seems to be much brighter now, leaving aside those MFIs which are under corporate debt restructuring, the industry continues to face challenges however.

“There will be challenges at all times. In the last two years there were regulatory and funding challenges. Now that most of those have been resolved, the other challenges are about bringing down costs and using technology to get more efficient. It is also about offering new products to the customers and deepening the customer connect,” Prasad said.

Bringing cost efficiencies has been on the agenda of microfinance companies and they have adopted ways like staff cuts and operational efficiencies. But in terms of product offering they need to bring in skill sets that are similar to banking.

“The industry needs to head into a direction where it could provide a range of financial services as well as offer bigger loan sizes to individual lender, said Samit Ghosh, president of MFIN and chief executive officer of Ujjivan Financial Services. According to him, although the industry has left behind challenges like funding, the bigger challenge remains. “A big challenge for MFIs is to transform themselves from being just a microcredit player and offer customers full range of financial services. Being able to offer savings is still a challenge and although the industry offers insurance and pension schemes, these are not viable. And to graduate from group lending to individual the industry needs a totally different skill sets, similar to banks,” Ghosh said.



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