state of the sector 2010 n.srinivassan 15 november 2010 1 microfinance india summit - 15 november...
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Microfinance India Summit - 15 November 2010 - New Delhi
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State of the Sector 2010
N.Srinivassan15 November 2010
Microfinance India Summit - 15 November 2010 - New Delhi
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Overall developments
• Growth continued – with moderation• Expansion to states outside southern region• SHG program morphing in to a welfare framework • MFIs intensify commercialization• Escalating competition in urban locations • Increasing commercial interest in equity and loan
funding (till recently)• Intense media scrutiny – searching for the hidden flaws• Negative news upstages the positive
Microfinance India Summit - 15 November 2010 - New Delhi
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Some numbers2008-09 2009-10 Growth %
No of borrowing members - SHGs -mn
54 62.4 16
No of MFI customers - mn
22.6 26.7 18
Outstanding Bank loans to SHGs Rs bn
222 280 26
Outstanding MFI loans to customers Rs bn
117 183 * 36
* Does not include portfolio managed on behalf of other institutions Rs 42 bn
Microfinance India Summit - 15 November 2010 - New Delhi
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Some more numbers
• Total microfinance clients exceed 100 mn• MF outstanding as % of bank credit 1.4• Total bank loans to MFIs – Rs 14 bn• Average per capita MFI loan – Rs 6060• Average per capita SHG loan – Rs 4450• Equity inflow through PE/VC – $ 209 mn
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Growth in MFI outstanding loans overtakes growth in SHG loans.
Comparison of growth rates
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Quality of growth
• Continued focus on outreach - not deepening• Concern for avoidance of multiple loans and
excessive debt – slow percolation to field• Emergence of ring leaders • Loan shopping and MFI hopping by customers• Repayment rates fall in 2009• Operational cost declines in a number of MFIs• Increased profitability and sustainability
Microfinance India Summit - 15 November 2010 - New Delhi
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Investment climate
• Very positive till five months back• 29 equity deals – smaller MFIs also get
funded• Public sector banks enter MFI financing• More securitization and assignment deals (Rs
42 billion in value)• SKS’ successful IPO for $350 mn• Post AP sentiment negative
Microfinance India Summit - 15 November 2010 - New Delhi
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Social performance
• Some efforts on responsible finance• More interest in SPM ratings• Poor not first-choice clients• Pricing – high and opaque in many MFIs• Recent initiatives in reduction of interest• Some movement on product diversification• Competition erodes lending disciplines• Performance not aligned to mission• Donors/funders gradually warming up to SPM
Microfinance India Summit - 15 November 2010 - New Delhi
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Policy and regulation
• Financial inclusion got more attention than Microfinance
• Corporate BCs, separate fees towards BCs’ costs - make branchless banking attractive
• Review of priority sector norms causes concern• Reported advisory on interest rate restrictions• Malegam committee a welcome step• When are we getting a comprehensive regulation
in place?
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Concentration riskAndhra Pradesh
Tamil Nadu
Karnataka
West Bengal
Orissa
Number of poor families
2.52 2.91 2.77 4.16 3.56
No of microfinance clients (SHG+MFI) 25.36 11.59 7.64 10.14 6.4MFI clients to poor households ratio 10.1 4.0 2.8 2.4 1.8MFI clients to total households ratio 1.6 0.9 0.7 0.6 0.8Total MF loans o/s (SHG+MFI) 169.49 64.46 46.06 34.34 27.16Average loans per poor household 67258 22151 16628 8255 7629
Microfinance India Summit - 15 November 2010 - New Delhi
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Challenges
• Competition – not only among MFIs but from state run programs too
• Political risks – possible contagion effect in other states
• Imminent breakdown of credit discipline• Rerating of risks by banks• Concentration in some states- over leveraged
customers• Image rebuilding – to take huge effort and cost• Near future is about coping – not initiating
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Future• Figure out purpose of MF as a business• Send out positive messages• Counsel patience in investors• Invest in customer comfort• Set high standards of customer protection• Establish and comply with ethical code of conduct• Weed out deviant institutions • Dialogue with government and invite regulation• Centre, State govts and RBI to articulate their vision of
microfinance
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A fresh start needed
Without customers at the core microfinance is not relevant - Revisit the mission
Not only MFIs, even government programs should rethink their purpose
Thanks