With rural areas impacted by Covid, MFIs face drop in collections
Surabhi
Mumbai |
Updated on
Stakeholders hopeful of recovery by end of June
With rural areas also impacted by the second wave of the Covid-19 pandemic, microfinance institutions (MFI) have been witnessing a drop in collections and expect further uncertainty but are hopeful that the situation may stabilise by the end of June.
“The situation was normal at least till the third week of April this year unlike April and May 2020 when there was a complete lockdown and no collections. Collections have now slowed down and they are only up to 20 per cent to 30 per cent of normal levels,” said P Satish, Executive Director of MFI association SaDhan.
Are loan repayments in lockdown mode?
May 10, 2021
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With the pandemic still not under control, collection efficiency of MFIs may be hit and risk perception for the sector remains high
The spurt in fresh infections following the second wave of Covid-19 pandemic and the lockdown being announced in several States mayimpact the collection efficiency of microfinance institutions.
Industry experts, however, feel it is still too premature to gauge the exact impact on loan growth and repayments, as there is still a lot of uncertainty around when the second wave will peak out.
According to Alok Misra, CEO and Director, MFIN (Microfinance Institutions Network), the first quarter is likely to be tepid as there is still uncertainty, but going by various mathematical and statistical predictions, the curve is likely to flatten out in end May or early June. Post that there could be a pick-up in business activity, given that there is a lot of pent-up demand.
Microfinance industry to witness disruptions from Covid surge: ICRA
By IANS |
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ICRA. (Photo: ICRA). Image Source: IANS News
New Delhi, May 4 : Covid resurgence is expected to further disrupt the microfinance industry, ratings agency ICRA said.
According to ICRA, risk perception for the microfinance industry remains high as Covid-19 pandemic is still not under control. Though some states have classified the microfinance industry as an essential activity, the cash flows of borrowers may be affected due to the restrictions or lockdowns, thereby affecting their repayment ability. Moreover, the risk of infections spreading faster in other regions and increased restrictions/lockdowns in more places persists, which would impact collections.
Read more about Microfinance collections may dip 8-10% sequentially in April: Icra on Business Standard. Healthy liquidity buffers maintained by most entities provide some comfort
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With increasing COVID-19 cases and the resultant restrictions in movements imposed by many states, the microfinance industry is likely to see an impact on their collections and may continue to witness asset quality pressures in the near term, says a report.
However, good on-balance sheet liquidity and sizeable provisions created by most of the Microfinance Institutions (MFIs) in FY2021 will provide a cushion to them for absorbing further shocks, Icra Ratings said in a report on Tuesday. Asset quality pressures for the microfinance industry to continue in the near term amid the rising COVID-19 infections and localised restrictions/ lockdowns, the agency s vice president and sector head (financial sector ratings) Sachin Sachdeva said.