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MOSL: FINANCIALS (Ground Reality) | Microfinance-Takeaways from Ground Zero in Maharashtra-Situation remains bleak

​FINANCIALS (Ground Reality) | Microfinance: Takeaways from Ground Zero in Maharashtra; Situation remains bleak; Only marginal improvement since demonetization

• We visited 20+ branches of 10-12 microfinance institutions (MFIs) in Mumbai and an important interior district of Maharashtra (including neighboring locations) to assess the on-the-ground situation in the MFI sector.
• Mumbai has not witnessed significant challenges, but there have been periodic issues in collections in some adjoining areas due to political interventions. While collection efficiency is ~60%, the overall portfolio size in these areas is insignificant in the larger scheme of things (INR2-3b estimated; less than 0.5% of industry portfolio).
• In the interior districts of Maharashtra, the situation remains grim even after six of demonetization and three months of local elections. Our channel checks suggest that ~10-20% of borrowers are paying on time, 30-40% are paying sporadically and the remaining 30-50% have not paid since Nov/Dec 2016. The industry's exposure to the interior districts of Maharashtra is estimated at ~INR20b (~4% of total industry portfolio).
• Our checks reveal significant deterioration in group discipline (attendance in center meetings is below 50%) and increasing signs of moral hazard.