Although some companies, such as Equitas, have demonstrated falling collection trends, most microfinance institutions reported improved loan growth in Q4 after previous low payouts. | Photocredit:
The current microfinance cycle seems to be approaching its final phase in the midst of struggle with stressed loans, because the indicators of activa quality improvement show various microfinancing institutions (MFIs), according to Investec analysts.
The analysts expect gradual recovery, which leads to consolidation within the sector. Investec emphasized that many players remain faced with challenges, including poor activity quality, staff turnover and a reduced collection of efficiency, and will require that capital will continue to float.
Equitas has shown weaker collection trends in Q4.
Investec analysts cheer creditaccess grame, Ujjivan Small Finance Bank and L&T Finance as top performers in this cycle. However, the Efeects of Vangrails 2.0 – which will come into force from April 2025 – remain a key factor to check. The analysts see the limited impact on Ujjivan and Creditaccess because they have partially taken these measures in the Q4, and the share of customers with four lenders is in one figures.
Most players have reported an improvement in the growth of the loan in Q4, after recording lower payments and MFIS Asset Under Management (AUM) in the past two quarters.
Investec has observed that creditaccess reported 5 percent AUM growth QoQ. While the MFI Aum from Ujjivan dropped 2 percent QoQ, the momentum picked up 38 percent in the same period.
Investec Report maintained buying reviews on both players, emphasized: “Although creditaccess grameen through the street is considered the” gold standard “in microfinance institutions, Ujjivan has performed equally well and is available at lower valuations.”
Published April 9, 2025
