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Microfinance stress takes toll on FY25 profits

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CHENNAI: Stress in the sector has left microfinance institutions bleeding. Listed MFIs have either reported a loss or a substantial decrease in their profits in the March quarter. This comes on the back of multiple factors including deterioration in asset quality, rising credit costs, borrower overleveraging and rising borrower overlaps that impacted the performance of microfinance companies during FY25. Muthoot Microfin posted a loss of Rs 401 crore in Q4 FY25 while Fusion Finance ((formerly Fusion Micro Finance) reported a loss of Rs 164 crore during the same period. Microfinance lender CreditAccess Grameen’s net profit dropped by 88% to Rs 47 crore in Q4 FY25 against Rs 397 crore in the year-ago period. Satin Creditcare Network’s standalone PAT in Q4 FY25 declined by 67% to Rs 41 crore from Rs 125 crore during the year-ago quarter. Mahendra Patil, founder and managing partner, MP Financial Advisory Services LLP said, the gross non-performing asset (GNPA) ratio for the sector surged to 16% at the end of FY25, up from 8.8% a year earlier, indicating a significant rise in defaults. However, the microfinance sector is projected to grow by 12-15% in FY26 under a conservative scenario, returning to FY24 levels, Patil added.

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