The eastern region, led by West Bengal, appears to be driving the growth of microfinance in India. Small loans expanded 7-19 per cent faster than the broader industry average in West Bengal, Bihar, Odisha, and Assam between FY16 and FY19, SIDBI-Equifax data showed.
These four states account for about 40 per cent of the total MFI loan book. The portfolio stood at Rs 178,547 crore at the end of FY19, a growth of 40 per cent on-year. The average ticket size of MFI loans stood at Rs 31,623 in FY19, which rose 13 per cent over the past fiscal. The highest number of loans was disbursed in the bucket size of Rs 20,000-30,000, and this category accounted for 46 per cent of total loans disbursed in FY19.
West Bengals’ share in the total MFI loan portfolio rose to 15 per cent in FY19 compared with 13 per cent in FY16. Thanks to greater penetration, MFI loans climbed 38.5 per cent in West Bengal to Rs 27,000 crore between FY16 and FY19. This is making analysts cautious on companies having significant exposure to West Bengal.
Kotak Institutional Equities said on WestBengal that penetration looks low as compared with the overall population, but it is quite high at nearly 25 per cent when looked at from a household perspective.
“High single-state exposure, especially in the eastern and northeastern markets, remains an area of concern, warranting a higher cost of equity for concentrated business models,” Kotak said.
West Bengal has 64 million borrowers though 86 million live accounts. The influence of MFI in West Bengal can be gauged from the fact that India’s first nine districts by loan portfolio are from the state.
The average ticket size of West Bengal loans stood at Rs 40,747 in the third quarter of FY19, compared with Rs 25,882 in FY16.
On an industry level,delinquencies are fewer when mapped to the days past due (DPD) yardstick. The portfolio risk reduced to 1.40 per cent in March 2019 from 4.74 per cent in March 2017 for 30 DPD, which shows improved collections.