one thing that could have been to interesting to look at is when the stocks topped and bottomed out at an index level (any microfinance focused index) - just to see if markets were able to capture all of this earlier than the numbers showed up in earnings or were they reactionary
1. Some of the pure play NBFC MFI's also indicate increasing focus towards micro business loans / micro lap (moving away from JLG backed MFI loans). This is a competitive field especially in the secured space with presence of large banks too. How will they see through AUM growth at 20% plus yields needs to be seen
2. Borrower level data from MFIN and Sa-Dhan showed over 1 crore borrower accounts written off or 180+ dpd. With such a large volume of borrowers defaulting on micro loans, and MFI loans by nature being billed as supporting "income generating activities", how did this not blow up into a rural consumption drop or GDP drop? Unless ofcourse, the loans were actually not used for income generation but for consumption activities?
3. With reducing focus on purely unsecured MFI loans by specialised entities, is this the end of the road for JLG model in India? And the 1cr+ borrowers with damaged bureau - is this end of the credit flow road for them? What scope does the unsecured (and unguaranteed, outside the purview of CGMFU) segment hold in future? Banks already fear going here while growth stage NBFCs wouldn't want to touch this segment fearing past failure (PE and VC also wouldn't support). Would they go back to informal moneylenders?
1. That's an astute observation, also we should not forget that NFBC MFIs operated in pockets of the economy where large banks are not able to service loans, for a variety of reasons. While there is a shift to secured type of loans, that wouldn't necessarily mean that they starting facing heat from the universal banks.
2. Most likely these loans were for consumption activity only and let's not forget the industry level data isn't that accurate too. It's very hard to draw fool proof relationships here.
3. JLG model is indeed under threat, atleast that's what these NBFCs are pointing at. That's a question even I have. I am interviewing Tamal Bandyopadhyay and will ask him the impact. on unsecured segment.
Most of these loans targeting consumption, drives an even bigger JLG concept & ethics question! Family's food, education, medical spends or worse, smartphone / alcohol purchases, guaranteed by neighbours and friends 🫢
excellent read, thank you.
one thing that could have been to interesting to look at is when the stocks topped and bottomed out at an index level (any microfinance focused index) - just to see if markets were able to capture all of this earlier than the numbers showed up in earnings or were they reactionary
well written , in fact is a chronicler for posterity
Thanks Mahesh for such kind words.
Brilliantly captured and so well crafted! Will pass it onto my network. Thank you!
Thanks Sameer :)
"😄- So, all the good stuff is human, and mistakes are AI" - Good 😄ne! - Thank you for a great effort Kashish, so well documented.
Thanks for reading it Avinash :)
Very informative read
Thank you Devik :)
Nice read! Had few observations:
1. Some of the pure play NBFC MFI's also indicate increasing focus towards micro business loans / micro lap (moving away from JLG backed MFI loans). This is a competitive field especially in the secured space with presence of large banks too. How will they see through AUM growth at 20% plus yields needs to be seen
2. Borrower level data from MFIN and Sa-Dhan showed over 1 crore borrower accounts written off or 180+ dpd. With such a large volume of borrowers defaulting on micro loans, and MFI loans by nature being billed as supporting "income generating activities", how did this not blow up into a rural consumption drop or GDP drop? Unless ofcourse, the loans were actually not used for income generation but for consumption activities?
3. With reducing focus on purely unsecured MFI loans by specialised entities, is this the end of the road for JLG model in India? And the 1cr+ borrowers with damaged bureau - is this end of the credit flow road for them? What scope does the unsecured (and unguaranteed, outside the purview of CGMFU) segment hold in future? Banks already fear going here while growth stage NBFCs wouldn't want to touch this segment fearing past failure (PE and VC also wouldn't support). Would they go back to informal moneylenders?
Thanks Rishidar :)
1. That's an astute observation, also we should not forget that NFBC MFIs operated in pockets of the economy where large banks are not able to service loans, for a variety of reasons. While there is a shift to secured type of loans, that wouldn't necessarily mean that they starting facing heat from the universal banks.
2. Most likely these loans were for consumption activity only and let's not forget the industry level data isn't that accurate too. It's very hard to draw fool proof relationships here.
3. JLG model is indeed under threat, atleast that's what these NBFCs are pointing at. That's a question even I have. I am interviewing Tamal Bandyopadhyay and will ask him the impact. on unsecured segment.
Cool! Thank you 😊
Most of these loans targeting consumption, drives an even bigger JLG concept & ethics question! Family's food, education, medical spends or worse, smartphone / alcohol purchases, guaranteed by neighbours and friends 🫢
Sigh... Where did we lose it!