During the two years of the pandemic, microlenders experienced credit losses of up to 10%, but things seem to be improving recently, with stressed asset levels declining, an industry association reported on Monday. According to Microfinance Institute Network CEO Alok MishraLenders, which primarily disburse unsecured funds to micro businesses, sustained loan losses of 5-10% in FY2011 and FY2012 due to the pandemic’s impact on operations and the financial health of borrowers.

He added that the exact size of the credit loss may vary from one institution to another.

However, after several waves of the pandemic, things have improved in terms of stressed loans, according to the head of the self-regulatory organisation.

He said the loan default rate had dropped from a high of 22% to 10-11% in July 2022 at the peak of the devastating second wave of the pandemic.

It should be noted that the lockdown and/or the spread of the virus, especially in the second wave in mid-2021, caused great stress in the industry as collection agents were unable to reach borrowers spread across remote areas, and The ability of such segments to generate income also suffered.

Mishra claimed that the new AAP government Punjab was experimenting with some populist ideas to benefit borrowers, but that the industry had effectively helped prevent such an outcome by emphasizing the need to develop further rather than a weak credit culture.

He said during the pandemic, a similar effort was made in Assam, but the region was able to guarantee that a complete loan waiver was avoided and offered an arrangement where a property is restructured. goes, he said.

Overall, according to MishraPolicy makers and the Microfinance Institutions Network (Microfinance Institutions Network) recognize the importance of a credit culture.MFINno longer see populism as a threat to the region.

Mishra said the entire portfolio of 100 lenders, which includes specialized NBFC-MFIs, microlending banks and small finance institutions, grew to Rs 2.85 lakh crore in FY22, a notable increase from the outstanding Rs 16,000 crore portfolio a decade ago. was growth.

According to Mishra, according to a study conducted by the organization, the potential market size will reach Rs 17 lakh crore by the end of FY25. According to Mishra, the average ticket size and tenor is increasing, with almost three-quarters of the loans now having tenors of more than 18 months. He said this indicates that the consumer profile is maturing.

He said that this sector supports 1.6 crore jobs and over 2% of the total value added of the country. However, he added that over 80% of credit is concentrated in the top 300 districts, indicating the need to further deepen the flow.

According to him, reserve Bank of IndiaThe March 2022 liberalization measures, which remove interest rate restrictions and place such institutions under the same regulation as other lenders, will benefit financial sector growth.