MFIs entering new phase of stability, higher profits, says Care Ratings

Monday, March 10, 2014

Care Ratings today said micro finance sector is entering a phase of stable regulatory environment, higher availability of credit and increased profitability. The agency believes that MFIs are slowly coming out of the damage inflicted by the Andhra Pradesh crisis of 2010. According to Care, micro-finance sector has gone through three broad phases in the past: high growth (till 2010), high volatility (2010-11), consolidation (2011-13); and is now entering the fourth phase of relative stability.

“This phase is expected to be characterised by a more stable regulatory environment, steady availability of funds, improving profitability with comfortable asset quality and capital adequacy and relatively lesser impact of concentration risk,” Care said in a report.

The report said although MFIs will see improvement in their credit profiles, credit ratings may not immediately show improvement as those will continue to factor in risks associated with unsecured lending, socio-political intervention, geographic concentration and operational risks related to cash based transaction.

Source: moneycontrol (link opens in a new window)