Microfinance Industry Network (MFIN)’s Post

Transcript

Mishra, and you can join in on that one as well. He's the CEO and director at Microfinance Industry Network itself. Thanks a lot, Mr. Mr. for joining in. You know of these additional measures that you've announced. Could you tell us currently what proportion of borrowers have for lenders, what proportion of borrowers have their indebtedness above ���2,00,000, and what proportion of borrowers have more than 60 days, you know, per day? 60 days overdue indebtedness, yeah. So good afternoon and thank you for having me here. So number one, the first point data point is ready in my head. So I can answer that. So number of customers as per the credit Bureau data, those who have more than three or that is four or more lenders is roughly around 5.9%. You can round it off to 6%. No number of clients having loans ever 2,00,000 of all microfinance loans put together is also marginal into the similar range. Now when you talk about portfolio at risk more than more than 60 days, the default that is we typically will take 60 to 180, that would be somewhere in the range of three to 3.5%. Ohh. Well, Mr. Mishra, Abhishek here. Or will the reduction in loan growth not impact the borrowers because the flow will get impacted and it will be tough for them with respect to repaying their debts as well? And another one, if you know there is a cap with respect to lending from the organized segment, will they return to unorganized segment? There is a very good question, Abhishek. So two things. Let me put things in perspective and allow me some time #1. When we are talking about not lending beyond 2,00,000 and not more than three microfinance lenders, we are talking basically about somewhere around 5 to 5.5% clients. And there also we are not saying not lend. We are saying if the borrower has four relationship. For an example, if the borrower reduces one relationship and comes to three lender. Average ticket size in microfinance today is somewhere around 50,000 around 1,50,000 loan from three lenders or one lakh 75. Would lose he is still able to get so that's not much of A liquidity constraint only it is returning back to a little bit of higher credit discipline. And second part of your question is more interesting that will they seek more informal sector loans. So well hypothetically yes but practically no. Why practically no because when we go to the field and when we talk to the borrowers after 1520 years, that is what microfinance has done in India have been touching 8,00,00, 000 low income clients and if you take their household members it goes to almost 3540 crore. It has demonstrated to them that formalized, legalized, regulated services at doorstep can be delivered with proper respect. The proper client protection vessel and I don't think for reducing 1 lender relationship, they will go back to the informal finance. That is not our intention also. And practically the gains which they have seen being associated with microfinance will make them come back to the sector by reducing their maybe exposure a bit. But I think they will not go back to the informal sector. Well, how will you make sure that you know the guidelines are followed by lenders with respecting, you know, the cap or the you know, amount to be followed? Because at current levels, you know, even with income of rupees 1415 thousand per customer, the end user is not monitor. And I hear from lenders that you know the money is being used to buy iPhone 16 Pro Max as well as other vehicles, which is not in productive cases, right. So the end user is actually a consumption. A loan and it's not been used to reproduce or you know, be able to guarantee a repayment to lenders. Well, I think if you, you must have been tracking the sector for quite some time and there is an unusual practice in a term which we use in the sector which we call as a UC loan utilization check. Generally after 30 to 40 days after the loan is disbursed, the field officer is supposed to check that the loan is being used for the purpose for which is has been taken and there can be some weakening in some cases plus also the UC might not be, I cannot say that it is 100%. Group the even then there can be some commingling of funds for other purposes. But let me assure you by and large these funds are used to pay, invest in their livelihood, businesses. But in case of emergency, if somebody is used 10,000 of rupees to pay for some medical emergency, I cannot completely rule that out. Maybe we are trying to strengthen the practice of UC more. That is one. And the second part of your question I think you asked about. I think I am missing that. Question other than the AUC, the loan utilization check you said for consumption and there was a second question also from the side, how will you ensure or try, OK, Yeah, that's a very productive use of the links. Are loans productive? See there are two parts to it. Now I get it. You said one is productive use that is for the institutions to do loan utilization check and ensure that it is used for the purpose for which the loan is given. And the second question which you asked in the start was relating to how will this. There has been so so let me tell you that we don't set the body and sorrow. We don't believe we just merely issuing guidelines and leaving it there. So we have various checks, we do data checks from credit information companies on disbursement. We do third party evaluations of the member institution and all these things are captured that are you adhering to the guardrails which have been prescribed or not. And let me tell you that in July really should one set of guardrails and the adherence. Have been quite positive from the sector. That is what our checks reveals and these are data checks, empirical data checks. But then, Mr. Mishra, the guardrails that you have put in place, do you think that it will ensure that the second-half see some improvement in the sector in general? Because the second quarter itself was a very painful one for a lot of these microfinance companies. What is the sense that you're picking up on the ground now that we are done with the better part of the third quarter? And do you see it improving going forward as we end FY25? Yeah. See any data what the final data which comes in from the Bureau is still to come in. I have only data till September. But what I speak to the lenders who are in the field and they get field reports. They say that November is better and there is some signs of stabilization. And what we read in the newspapers today that the Kharif output has been a bumper Kharif output. The rabbi showing has also started in full swing and we hope that. With this normalization and kick start in the rural economy, things so destabilized by January. Alright, thanks. Should stabilized by January, you know, two-part question then Mr. Mishra. The first one of course is that you've given U.S. data, you've said that you know 3. 5% of the MI loans are more than 60 days overdue. So the overall extent of the problem should not be more than 3.5% as of the data that you have right now. I just wanted to understand from individual players who would be the ones who would be most vulnerable to this where their exposure is more than the industry wide 3.5% because I'm sure. Some would be above this 3.5% mean and some would be below that. So I would like you to call out some specific companies out here. And the second major worry is that while you're saying that things will improve from January, Street is worried about, you know, is it too little too late? Well, I would only say that some, some of the persons who follow the sector say it is too much, too ugly. So you, us and somebody is saying too little too late. So we have to strike a balance that we don't pull those things too hard and at the same time see they ensure that their discipline returns back. Now when you said you quoted me as 3.5%, I just gave a rough figure that is between overdue between 60 to 180 days, it may be ��.5%. I don't have the ready data with.