ARX Series 1 September 2021
Microfinance Industry in Pakistan
2020 has been a challenging year for the microfinance sector. The outbreak of COVID-19 led to increased risk of non-recovery from customers who underwent distressed financial situations due to lockdown and exceptional circumstances.
Authors: Saniya Tauseef; Insia RazaDownload PDF
Gross Loan Portfolio (GLP) clocked in at PKR~356bln - June’21, up by ~10% from PKR~324bln as at End-Dec’20. Almost equal growth of ~5% was observed in the 1st and 2nd Quarters of CY21.
Among peer groups, MFBs continued to hold the highest share of the GLP - ~73%, while MFIs and RSPs collectively held the rest (June’21).
Active borrowers increased to ~8mln – June’21, up by ~15% from ~7mln as at EndDec’20. Among peer groups, MFBs accounted for ~58% of the active borrowers while MFIs and RSPs accounted for the rest.
Credit quality of the Sector dropped further with Portfolio At Risk (PAR>30 days) rising to ~5.2% - June’21, up from ~3.7% as at End-Dec’20. Among peer groups, the highest to record infection were RSPs (~8.2%), though they hold a small system share. MFBs, holding the largest share in the pie, witnessed a weakened credit health with PAR>30 days increasing to ~4.5% - June’21 from ~2.9% as at End-Dec’20. The rise in NPLs is observed after the expiration of deferment/restructuring period in Mar’21. Meanwhile, MFIs recorded a marginal improvement registering PAR>30 days at ~4.1% - June’21 (~4.7% End-Dec’20).
Overall fresh disbursements were recorded at PKR~214bln in 1HCY21. Disbursements have gradually picked up since lockdown restrictions across the country have relaxed. In CY20, disbursements dropped by ~6% YoY as compared to CY19.
Deposit base of MFBs clocked in at PKR~378bln – June’21, up ~1.5% from PKR~373bln as at End-Dec’20. The sector’s deposits grew sharply by ~40% in CY20, majorly on account of better rates offered by the MFBs to attract funds.
Barring a few exceptions, the Sector’s bottom line closed in positive in CY20. Some deterioration was reflected in 1HCY21 majorly on account of reduced credit quality.
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