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It appears that the microfinance sector came out relatively unscathed during the third quarter of the year, a period of heightened economic challenges that was made worse by natural disaster in the form of devastating floods in Sindh, Balochistan and KP. As per the latest sector report released by the Pakistan Microfinance Network (PMN, which is the sector’s representative body), there was healthy sequential and yearly growth in both the micro-credit and micro-savings portfolios during the Jul-Sep 2022 quarter.

The PMN’s sector data, which is collected from some three dozen Microfinance Providers (MFPs, which constitute both Microfinance Banks, or MFBs, and Non-Banking Microfinance Companies, or NBMFCs show the number of active borrowers at 8.77 million by September-end 2022. That provides a yearly growth of 7 percent (nearly 6 lac additional borrowers) and quarterly growth of 3.5 percent (nearly 3 lac additional borrowers). About 65 percent of borrowers are with the MFBs and rest is with the NBMFCs.

The growth in borrower-base was reflected in the value of the gross loan portfolio (GLP) of the sector. The GLP reached Rs470 billion by September-end 2022, growing by 5 percent over the previous quarter (an addition of Rs21.4 billion) and 29 percent over the same period last year (a jump of Rs104.6 billion). MFBs dominate the GLP, having more than three-fourth of the pie, whereas some 23 percent of the GLP is with the NBMFCs. Overall, the GLP has been on the way up ever since its dip in early-Covid.

In the savings department, the number of savers continued its gradual upward march, reaching 89.76 million by September-end 2022. There was a 4 percent quarterly growth (3 million new savers) and 24 percent annual growth (17 million new savers). The value of savings amassed by MFPs (only MFBs can take public’s deposits) stood at Rs449 billion at the end of September 2022, increasing by 1 percent quarter-on-quarter (an addition of Rs3 billion) and 17 percent year-on-year (an addition of Rs65 billion).

Micro-savings are being mobilized through two main channels: bank branches and mobile wallets. While the MFBs’ bank branches account for 15 percent of active savers in the systems, their share in value of savings is about 84 percent due to higher average deposit size relative to m-wallets. M-wallets dominate the number of savers (85% of active savers) due to ease of opening of account, but their share in overall savings is considerably small (16% of value of savings) because of typically low-value deposits.

While quarterly indicators look good, the one bit of bad news was that the microfinance sector witnessed relatively higher level of delinquencies. The sector’s share of loan portfolio at risk (PAR) for over 30 days stood at 5.9 percent in the Jul-Sep 2022 quarter, “as a result of the effects of flooding,” PMN noted. This ratio was higher than PAR (>30 days) of 4.5 percent in the previous quarter (but the same as 5.9 percent in Jul-Sep 2021). Let’s see what the year’s remaining quarter has in store for microfinance players.

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