India’s Third Largest Microlender Says Loan Growth Is Back
Microlending is back at its pre-demonetisation levels as loan growth has picked up in the last six months, according to Satin Creditcare Network Ltd., India’s third largest microfinance company by gross loans.
Disbursements are at Rs 1,100-1,200 crore a quarter, better than the pre-demonetisation levels of Rs 800-900 crore, HP Singh, chairman and managing director at Satin Creditcare Network, told BloombergQuint in an interview. The second quarter will be better than the previous three months as the company expects a growth in loan book, he said. It targets a Rs 5,500-crore assets under management by March.
Microlenders offer small-ticket loans to the poor and small businesses, mostly in cash. Disbursals declined after Prime Minister Narendra Modi’s November decision to scrap old high-value notes pulled 86 percent of the cash out the system. That slowed down growth.
As the effects of demonetisation are over, Satin Creditcare’s asset quality is improving. Collection efficiency has increased from 50-60 percent in November to January to 100 percent now, indicating an improved asset quality. Coupled with higher provisioning, it will reduce the pressure of non-performing loans in the second quarter, said Singh.
On the impact of farm loan waivers, Singh said borrowers understand that they for specifically for agricultural borrowing and not related to microlenders. That sets to rest any possible impact on microfinance companies. “In fact, our collection efficiency has improved after farm loan waivers,” he said.
Industry body Microfinance Institutions Network, in its August report, ranked Satin Creditcare as the third largest microlender by gross loan portfolio in India after Bharat Financial Inclusion and Grameen Koota Financial Services.
Fourth QIP Issue In A Year
Satin CreditCare raised Rs 150 crore via a qualified institutional placement, the fourth in a year, to fund growth and improve capital adequacy to 26 percent from 21 percent, Singh said.
The issue will help leverage Satin CreditCare’s growth and reach its guidance of Rs 5,500 crore loan book by March 2018. “We may not need more capital for growth hereon and this may be one of our last capital raise in the next one year or so,” Singh said.