KARACHI: The disbursement of microfinance loans flat-lined in January-March on a quarterly basis after registering an almost 20 per cent increase in the preceding three-month period.

Micro-loan disbursals in the first quarter of 2022 totalled Rs134.7 billion, up 0.1pc from the October-December quarter of 2021, latest data released by the Pakistan Microfinance Network (PMN) shows. However, the increase was 30.6pc on a year-on-year basis.

Negligible quarterly growth in disbursements came alongside a 6.3pc increase in the gross loan portfolio (GLP), which amounted to Rs417.2bn. Loan disbursements are fresh credit extended in the three-month period while GLP accounts for the entire outstanding principal owed by existing clients.

According to the commentary by the PMN analysts, the major contribution in the growth of GLP was from the microfinance bank peer group where Mobilink Microfinance Bank Ltd was at the top of the list owing to the significant adoption of digital credit and a greater outreach to the customer base.

On an annual basis, outstanding microfinance loans rose 22.5pc over the trailing 12 months.

The flat-lined quarterly growth in fresh loan disbursements is apparently reflective of the high-base effect. The one-fifth increase in micro-loans in October-December of 2021 was owing to the sowing of wheat, which takes place in the last three months of every year. No such seasonal impetus greased the loan disbursal process in the January-March quarter.

The microfinance industry disbursed 5.2 million loans in the three-month period under review, up 10.5pc from the preceding quarter.

There were 8.2m active borrowers at the end of January-March, up 0.9pc from the number of borrowers at the end of the October-December quarter.

The average loan size in January-March was Rs25,629, down 9.4pc from Rs28,292 in the preceding quarter. The sharp decrease in the average ticket size is because of no growth in fresh loan disbursements (numerator) coupled with a notable rise in the number of loans (denominator).

On an annual basis, however, the average loan size increased 2.4pc in January-March. 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.

The ratio of early delinquencies — loans more than 30 days overdue — improved from 5.8pc at the end of December to 4.2pc at the end of March. The share of clientele of the microfinance industry in the rural areas increased to 70pc from 65pc in the previous quarter.

As for micro-savings, the number of active savers remained 84.2m, up 7pc and 25pc on a quarterly and annual basis, respectively.

The value of savings stood at Rs429.5bn at the end of January-March, up 1.7pc from a quarter ago. Mobilink Microfinance Bank Ltd and Telenor Microfinance Bank Ltd drove the expansion in the active savers base primarily because of mobile wallets.

The microfinance penetration rate — which shows the share of the relevant population that has used microfinance products at least once in their lifetime — was 40pc at the end of March versus 37pc a year ago. This means six in every 10 potential customers in the country still can’t access microfinance.

Published in Dawn, July 10th, 2022