MFIs to face asset quality pressures in near term amid 2nd Covid wave: ICRA

The near-term outlook for MFIs is clouded given the Covid-induced disruptions. However, the overall long-term growth outlook for the domestic microfinance industry, including MFIs and micro finance-focused small finance banks (SFBs), remains robust.

The microfinance industry is likely to face asset quality pressures in the near term due to the recent surge in COVID-19 infections and localised restrictions, says a report. However, a majority of microfinance institutions (MFIs) will be able to withstand any stress due to their improving collection efficiency and good on-balance sheet liquidity, Icra Ratings said in the report. “We estimate asset quality pressures for the MFI industry to continue in the near term and the same may get accentuated with the recent increase in Covid-19 infections and localised restrictions/lockdowns,” the agency's Vice President and Sector Head (financial sector ratings) Sachin Sachdeva said.