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MFIs better prepared to deal with disruptions due to rising COVID-19 cases: MFIN CEO

The microfinance sector is unlikely to face major challenges from the second wave of COVID-19 and is well prepared to face any disruption, Microfinance Institutions Network (MFIN) CEO Alok Misra said.

Over the past year, microfinance institutions (MFIs) have streamlined their processes, trained field staff on COVID-appropriate behaviour and in dealing with lockdowns, and focussed on digitisation, and these steps will help them in managing any kind of situation, he added.

“In the last one year, training, involvement of senior-level people at the ground level and digital content have ensured that the (MFI) sector is far better prepared (now) than when it (COVID-19) hit us last year,” Misra noted.

Till the time the pandemic continues, there will be local level lockdowns that would create medium to minor level disruptions to livelihoods, but the industry has learned to live with it, he said.

“I can’t say that it would be normal to pre-COVID days. Some impact would be there, but it would be minimal, which will not be debilitating on the industry,” Misra added.

MFIN is an RBI-recognized self-regulatory organisation (SRO) for the microfinance industry. It has 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs as its members.

Misra said the MFI industry is adopting innovative methods to reach out to their clients, keep the connect going on and survive.

Rating agency Icra Ratings in a recent report said the overall long-term growth outlook for the domestic microfinance industry, including microfinance institutions (MFI) and micro finance-focused small finance banks (SFB)s, remains robust, even though the near-term outlook is clouded given the COVID-19 induced disruptions.

It, however, said the asset quality pressures for the MFI industry will continue in the near term and the same may get accentuated with the recent increase in COVID-19 infections and localised restrictions/lockdowns.

“Nevertheless, improving collection efficiency, good on-balance sheet liquidity and capitalisation should help most entities to withstand the stress,” the agency added.

MFIN releases performance numbers of MFIs every quarter. The fourth-quarter numbers are yet to be declared.

Misra said during the third quarter of FY21, the sector disbursed around Rs 60,000 crore, similar to the corresponding quarter of FY20.

“If I extrapolate that (Q3 FY21 trend) then the disbursement pattern in January-March, when the COVID-19 situation was better than Q3, would have been normal,” he said.

The collection efficiency of MFIs in the fourth quarter stood at close to 92 per cent, he added.

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