Microfinance Focus, February 15, 2012: After more than fifteen months of battling the microfinance crisis, industry players now appear to be optimistic for a revival in 2012. With positive developments like the creation of a new category of NBFC-MFIs by the Reserve Bank of India, easing of liquidity crunch and a Microfinance Bill in the offing, the sector is expecting to get back on the growth track once again.

Speaking to NDTV, PH Ravikumar, Non-Executive Chairman of SKS Microfinance, India’s largest and only listed microfinance institution, said that the sector is well out of trouble.

“Banks have started opening up their purses and there is a flow of liquidity in microfinance institutions. We have already announced a QIP and the road shows are currently on. We are optimistic of closing this in next 3-4 weeks”, he said. SKS is expecting to raise Rs 900 crore via sale of shares to private institutional investors.

Last month, SKS posted a posted a net loss of Rs. 428 crore ($ 85 million) for the third quarter. The company’s total income fell to Rs 83.82 crore from Rs 384.48 crore in the same period a year ago. Its provisions against bad loans rose to Rs 358.66 crore from Rs 100.75 crore last year. SKS’s net Andhra Pradesh portfolio has reduced to Rs 822 crore.

“We have cleansed our balance sheet and substantial portion of AP exposure has been provided for”, Ravikumar said. In terms of collection however, there is not much of an improvement as collections are still between 10-15 percent, he remarked.

According to Ravikumar, two major developments still have to take place - the introduction of the Microfinance Bill in the Parliament and the follow up actions on that. “I think if these two things are put in place, the sector is well out of trouble which it has seen in the past fifteen months”, he said.

Meanwhile, SKS performance on the stock exchange is also showing signs of improvement. After reaching a 52 weeks low of Rs. 85 last month, its stock prices have risen. SKS today was up by 5 percent and closed at Rs. 139.65 on Bombay Stock Exchange.

“We are looking ahead and trying to grow MFI book in non-AP states. This quarter we expect disbursements to be more that Q2 and Q3 put together. We are working on new schemes of business which will kick in the new fiscal”, Mr. Ravikumar said.

Padmaja Reddy, Managing Director of Spandana Sphoorty, another Andhra Pradesh based microfinance institution believes that all the issues that the industry has faced are for its betterment only. “In the last few months we have seen significant changes happening. We now have credit bureaus and almost all MFIs barring few are uploading their data on the credit bureaus. It will help us address issues of multiple lending and over borrowing”, she said.

“Today we have a cap on interest rate, on profitability margin and on number of loans to borrowers. All these measures will help the industry flourish”, Ms. Padmaja added.

In Andhra Pradesh, MFIs and SHGs have not done any substantial disbursement over the last one year. Microfinnace borrowers were thus forced to go back to moneylenders who are charging higher rates or these borrowers are not undertaking any productive activity at all.

“The demand for microfinance still exists. At no point can money lenders be considered as a replacement for microfinance institutions”, claims Ms. Padmaja.