ValuePickr Forum

Indian Microfinance Sector and the companies in the sector

See this interview. One can understand the impact on NBFC and housing companies.


For information:

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I wonder if the money collected in this yojna go into the Mudra like schemes to fund NBFC’s that Gurumurthy mentioned?

Sks presentation has good data in collections and disbursements

SKS presentation reiterated what I have been saying all along.

Fundamentally not much has changed in MFI business.

  1. The bottom of the pyramid where MFI serves are the most resilient to any economic downturn, and demonetization is not even an economic downturn, just a temporary currency shortage issue.
  2. The poor will have absolute no advantage defaulting on a MFI loan, and hence wont do it.
  3. NaMo govt, after screwing up its traditional trader votebank, will never do anything stupid to screw up poor, so MFI sector wont be allowed to goto drain.
  4. Most of noteworthy policies/reforms of NaMo, be it JanDhan, Adhaar, DBT, Insurance, MUDRA are aimed at bottom-of-the-pyramid and financial inclusion. MFI being torch-bearer in this segment, should be last institutions NaMo govt would want to screw up.
  5. After yesterday’s Tax amnesty scheme, we can easily extrapolate that some other super-crazy anti-black money reform will come after its expiry. That implies one thing, the traditional money shark will either shut his shop, or need to substantially reduce its scope because of this. Advantage MFI

Having ability to think independently is critically important when investing, and I see lack of the same in the community, especially when it is needed the most (i.e. demonetization). Those who can think independently in such scenario are bound to generate extra alpha in their pf.


I had the same view. Was disappointed when RBI let banks accept old notes but not these poor guys paying 800 rs installments. That made me qn that view.

Once the demonetisation mess is cleared, market would trust the cleaner MFIs even more as the business model would have shown resilience and passed the stress test… add to that with higher growth coming out of lower rates and lower competition… the un-affected NBFCs might attract even better multiple and from the presentation SKS(with daily collections between 93-96%) seems to be one coming out as a winner out of this

Worst fears coming true

Well, as mentioned earlier, I have seen this movie very closely. Whole biz model went up in smoke in a matter of days. It won’t be as troublesome this time but people in the lower strata are generally lack financial discipline. In fact most of them are poor largely because they lack discipline. Few worrying signs like 60 day window provided by RBI was not a great move. They could have delayed the announcement to end of the quarter.

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I would be more wary of UP due to upcoming elections and due to a poorer economy than few other states.
Even the MFIN representation met MP and Maharashtra CMs (of BJP) but not the UP CM. Lol.

Disc: Invested in a couple of MFIs.


Why should a person default on Rs. 500 today, when he can on Rs. 5000 in future. :slight_smile:

Initial collection suggest intention is there.

As long as disbursement won’t stop 100%, i can’t see any Biz model risk.

Things will be back to normal, but it takes time.


when there is nothing to lose by defaulting, folks do default even on small outstanding. Aren’t MFIs disbursing loans to the same folks who defaulted during the previous crisis. I agree that higher and higher disbursements and quick churn are critical to make good money here. But defaults are equally costly.


This Robinhood culture in not good. It will encourage people to default.

Don’t think this is Robinhood, he is just trying to say don’t be part of money laundering scheme. May be language is raw which folks in rural area understand.

I wonder how MFIs are doing disbursement these days as 2000/- notes are scarce. Any idea ? I believe bottom of pyramid prefers notes over online transfer of money.

They are basically trying to 3 things (Based on listening to concalls and interviews)

  1. Disbursing whatever they collect from their customers
  2. Increasing percentage of cashless transaction
  3. MFIN talking with RBI to allow them take old notes for loan collection/and exchange it at banks to get some fresh money

Disbursement will be slow till currency note shortage issue is resolved, should easily take 1-2 quarter time.

I think different MFIs at different stage of cashless:cash ratio for both disbursal as well as collection. If i remember for Ujjivan, they have 60:40 cashless:cash ratio for disbursal and now bound to increase towards cashless,however, collection is more or less cash as of now

How-to-MFI IPOs-Final.pdf (2.0 MB)
Good analysis on the valuation of Equitas and Ujjivan and the core mission of MFI companies


News/reports from multiple sources confirming the fact that currency crunch in most of rural area/tier 2 cities are almost non-existent. People can easily walk into an ATM and withdraw money from ATM without standing in line. That shall reduce the repayment of loans to MFIs by and large. I am hoping most of the MFIs would have touched 80-95% repayment level by now.

The biggest issues MFIs will be facing now is availability of hard cash from banks. As customers are preferring hard cash, rather than cashless disbursement in the cash-crunch era, the best MFIs can do is recycle whatever is being collected from folks as loan. That should depress the earning growth for 1-2 quarters. Once money supply is restored to them (which is inevitable, if NaMo govt wants to re-elected in 2019, as failure of doing so will be near suicidal for them), growth should be back and they should continue their growth story as before.


^Plus a very large number of smaller denomination notes have been released : 1900 crore notes in total as per RBI iirc which means 1900/25 = 76 notes on average for every family of 5 members.

And I believe it is being felt by everyone here on Valuepickr as well. That 100 re. notes are aplenty.