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UPL 688.10↑12.30(1.82%)
Wipro 401.70↑7.60(1.93%)

Default rate in microfinance sector declining, post-pandemic: Report

Karnataka and Tamil Nadu are the states with the highest percentage of outstanding loans from micro finance followed by Bihar, Uttar Pradesh and Madhya Pradesh

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A microfinance loan is defined as a collateral-free loan given to a household having annual household income up to Rs 3 lakh

4 min read Last Updated : Jan 17 2023 | 9:44 PM IST

The microfinance sector is coming out of Covid-induced stress, with the default rate for microfinance institutions (MFIs) declining from 16.7 per cent in June 2021 to 5.3 per cent in March 2022, according to the Inclusive Finance India Report by ACCESS Development Services.

With some seasonal and event-based exceptions, net non-performing assets have been less than 1 per cent in the last 20 years.

“The portfolio at risk (30+ days) for the sector as a whole increased from 1.39 per cent in March 2020 to 9.01 per cent in March 2021. It then fell to 5.27 per cent in March 2022. The spike in 2021 and 2022 was attributable to loans under moratorium. It was also for subsequent restructuring falling due for payment but had a difficult livelihood situation that made loan service impossible,” the report said.