Chennai: Steady growth in average ticket size and exposure per borrower in micro finance has become a cause of worry for industry observers. In Q1FY20, both these were the drivers of micro credit growth, which otherwise witnessed a slower growth over last year.
Growth in micro finance decelerated in 1QFY20 to 33 per cent against 45 per cent in FY2019. More worrying is that this growth was a result of impact of rise in average ticket size combined with increase in exposure per borrower owing to increased lending to existing borrowers or extension of credit by a new lender to an active borrower, finds Kotak Institutional Equities.
Average ticket size has been going up in the past few quarters and in Q1FY20 it was up 12 per cent YoY to Rs 31,700. In Q1FY18, it stood at Rs 26,000. The rise in ticket size was the strongest in West Bengal and Tamil Nadu at 15 per cent YoY compared to the industry average of 12 per cent. The average ticket size in West Bengal was at Rs 41,900, which was 30 per cent higher than industry average. Almost 45 per cent of portfolio had an average ticket size of Rs 60,000.
Similarly, exposure per borrower was up 17 per cent to Rs 35,200 in Q1FY20. In Q1 FY18, it stood at Rs 24,000. The number of borrowers associated with more than four lenders has increased across most major states with this phenomenon being most prevalent in Tamil Nadu - 6 per cent of borrowers against 2.2 per cent in FY19.
Further, growth in number of loan accounts was higher than growth in number of borrowers, indicating same customer holding more number of accounts. Compared to FY19, number of borrowers grew by 14 per cent in Q1 FY20 and number loan accounts went up by 20 per cent. Number of borrowers has gone up from 44 million in Q1FY18 to 54 million Q1FY20. Meanwhile, number of loan accounts stood moved up from 41 million in Q1FY18 to 60 million in Q1FY20.
Recently, RBI had increased lending limit per eligible borrower has been raised from Rs 1 lakh to Rs 1.25 lakh. Allaying worries about the trend, Manoj Nambiar, Chairperson, MFIN said that different micro credit agencies, including universal banks, small finance banks, NBFC-MFIs and NBFCs have recently launched "Code of Responsible Lending". "This is meant to ensure best practices among all the entities, including maintaining the RBI lending limit per borrower. As many as 92 lenders who account for around 55 per cent of the total micro credit have adopted this code, he said.
