KARACHI: The disbursement of microfinance loans decreased 8.2 per cent in July-September on a quarterly basis while early delinquencies — borrowers missing loan payments — rose notably “mostly as a result” of the floods hitting parts of Sindh, Punjab and Khyber Pakhtunkhwa.

Micro-loan disbursals in the third quarter of 2022 totalled Rs140.5 billion, down from Rs153.1bn from the preceding three-month period, the latest data released by the Pakistan Microfinance Network (PMN) shows. However, the increase was 25pc on a year-on-year basis.

The portfolio at risk, which constitutes loan instalments past due more than a month, increased to 5.9pc from 4.5pc on a quarterly basis as the natural calamity affected the people’s ability to pay back their debts.

According to microfinance sector analyst Abdullah Saeed, the industry showed resilience in the third quarter of 2022 despite the large extent of the natural disaster.

The drop in disbursements came alongside a 4.8pc increase in the gross loan portfolio (GLP), which amounted to Rs470.1bn. Loan disbursements are fresh credit extended in the three-month period while the GLP accounts for the entire outstanding principal owed by existing clients. GLP increased 28.6pc on a year-on-year basis.

The number of active borrowers of micro-credit remained 8.2 million, up 2pc and 20pc on quarterly and annual bases, respectively.

Mobilink Microfinance Bank continued to lead the list of largest microfinance providers in terms of active borrowers. Its active borrowers in July-September was 2.4m, showing a market share of 27.6pc. It was followed by Khushhali Microfinance Bank (8.7pc), National Rural Support Programme (8.2pc), Akhuwat Islamic Microfinance (8pc) and Kashf Foundation (6.9pc).

The portfolio of microfinance banks was Rs361bn while that of non-bank microfinance companies remained Rs109bn.

The number of active borrowers of microfinance banks was 5.6 million while those of the non-bank microfinance companies was 3.1m. Khushhali Microfinance Bank is the largest provider of microcredit among microfinance banks with 18.5pc of the industry-wide GLP, followed by HBL Microfinance Bank (16.9pc), U Microfinance Bank (9.7pc), Mobilink Micro­finance Bank (9.6pc) and National Rural Support Programme (7pc).

The microfinance industry disbursed 5.6m loans in the three-month period under review, up 3.6pc from the preceding quarter. The average loan size in July-September dropped 11.4pc to Rs25,050 from Rs28,270 in the preceding quarter.

The State Bank of Pakistan has now allowed microfinance banks to disburse small business loans of up to Rs3m. This is expected to result in an increase in quarterly disbursements and the overall average loan size. Unlike in the past, microfinance banks are now actively financing tractors and other commercial vehicles and extending long-term loans for affordable housing.

As for micro-savings, the number of active savers remained 89.7m, up 3.6pc on a quarterly basis. The value of savings stood at Rs449.4bn at the end of September, nominally up from a quarter ago.

The microfinance penetration rate — which shows the share of the relevant population that has used microfinance products at least once in their lifetime — was 42.7pc at the end of September versus 41.3pc a quarter ago. This means almost six in every 10 potential customers in the country still can’t access microfinance.

Published in Dawn, December 18th, 2022

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