Microfinance sector set for new growth wave: Fusion Micro Finance, CreditAccess Grameen, among stocks to buy
microfinance institutions (MFI) grew at a slower CAGR of 15% over FY20-23 as compared to its 29% growth over FY14-20, largely due to major political and asset-quality headwinds. However, analysts believe these asset quality woes are largely behind and new regulations for the sector offer a level playing field for NBFC-MFIs.
Coupled with higher HH limits, the sector is already riding the new growth wave of 22% in FY23, albeit with an eye on building portfolio resiliency, Emkay Global Financial Services said in a report. The brokerage house expects overall MFI gross loan portfolio (GLP) CAGR of 21% over FY23-26, and reach ₹6.2 lakh crore.
However, despite such strong growth, household penetration will only increase, from 29% to 38%, while GLP/opportunity share would improve from 29% to 36% by 2025-26, offering a long growth run-way and allaying concerns around saturation. The NBFC-MFIs are also expected to claw-back some market share from banks in the near term. After a long time, banks have lost market share to NBFCs.
Their market share has come down to 51% from 60% in FY21. “This is likely to persist in the near term, as such players including CreditAccess Grameen, Fusion Micro Finance, Spandana Sphoorthy Financial, Satin Creditcare Network, etc, look for accelerated growth of over 25% versus calibrated around 18-20% growth for a few large universal banks including Bandhan Bank, IndusInd Bank and RBL Bank, given their strategy to limit share of unsecured loans or diversify portfolio," Emkay Global said.
That said, the MFI sector, given its high growth of more than 20% and RoA potential of over 2%, will continue to attract new banks and thus even look for inorganic acquisitions, the brokerage believes. Also Read: Stocks
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