CreditAccess Grameen Expects 35-40% Loan Disbursement Growth In Next Two Years
Here’s what CreditAccess Grameen’s CEO Udaya Kumar Hebbar had to say after the microfinance lender’s September quarter results.
CreditAccess Grameen Ltd. expects its overall disbursements to grow 35-40 percent over the next two years as the microfinance lender focuses on rural markets and first-time borrowers.
“Microfinance industry is resilient against the rural downturn,” said Managing Director and Chief Executive Officer Udaya Kumar Hebbar told BloombergQuint in an interview. “The demand is very high in these areas due to movement of informal borrowers to formal channels. Also, around 40 percent of new customers are first-time borrowers.”
But growth in disbursements by microfinance lenders, according to CRIF High Mark, slowed amid a liquidity squeeze and an economic slowdown. The gross loan portfolio of microfinance lenders grew nearly 1.6 percent sequentially in the quarter ended June compared with near-12 percent growth in the January-March period, according to latest data available with the credit bureau.
Rural business comprises over half of the loan portfolio for microfinance companies.
Still, CreditAccess said it has implemented 95 percent of its branch expansion plans for the current year. And that’s expected to “significantly” reduce the company’s cost-to-income ratio in the next two quarters.
“The cost of these branches are front-loaded and that’s the reason behind the ratio being at its peak at the moment,” Hebbar said. The firm’s cost-to-income ratio stood at 39.8 percent in the second quarter, a jump of 400 basis points year-on-year. The ratio is a measure of profitability—the lower it is, the more profitable is a lender.
CreditAccess Grameen Q2 Results 2019-20: Key Highlights (Year-on-Year)
- Net interest income up 23.3 percent to Rs 259.4 crore.
- Net profit up 37.3 percent to Rs 100.9 crore.
- Disbursements up 39 percent.
- Gross NPAs at 0.52 percent versus 0.55 percent (quarter-on-quarter).
- Cost-to-income ratio at 39.8 percent versus 35.7 percent.
- Net interest margin at 12 percent versus 12.9 percent.
Watch | CreditAccess Grameen’s Udaya Kumar Hebbar On Q2 results