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Local micro lenders likely to outpace Asian peers in CY21

Last mile lenders in India are likely to recover faster than their peers in Asia dispelling fears of an extended economic cost of the second wave of COVID19.

India’s micro finance institutions are expected to expand their loans by 18-38 percent by this year’s end, show an estimate by Singapore-based Robocash, a global fintech group of companies focused on providing alternative lending services.

“In a pessimistic scenario, the loan portfolio of Indian MFIs will rise by 18% by December 2021, and in an optimistic scenario – by 38%,” Robocash said in research a note to ET.

“Of note, the pessimistic scenario for India is close to the optimistic one for the entire Asia. It means that India will be recovering faster than Asia in general.”

India’s MFI market makes up about 41% of the industry in Asia. It includes both non-banking lenders and banks.

The forecast of the further growth of India’s microfinance market is based on the data from Microfinance Institutions Network. The study uses data on the loan portfolio from 2016 to 2019 and a quarterly breakdown in 2020.

During the pandemic, the Indian market has been following the pattern of the Asian MFI market, according to the research note that encompasses all local non-bank lenders.

In the middle of 2020, its loan portfolio dropped by 2 percent from March to June. For NBFCs alone, it reduced by 3%.

While the loan portfolio of the whole Asia did not stabilize last year, back home, it recovered and increased by 10 percent year-on-year, Robocash said.

The research study estimates pessimistic and optimistic scenarios for the Indian market.

The optimistic scenario implies that the portfolio growth will return to pre-covid levels and considers the under consumption effect, which increases the demand for additional funds.

The pessimistic scenario means, the negative effect of the pandemic will remain within the year, accompanied with worsening of borrowers’ financial standing.

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