Banks Gained 11.6% Share For Loans In Micro-Credit Lending In The Last 4 Years: Report
The Return on Assets decreased from 3% to 0.67% while Return on Equity declined from 13.17% in FY 2020 to 1.44% in FY 2021 for MFIs.
The Inclusive Finance India (IFI) Report 2021 released by Dr Rajiv Kumar, Vice Chair, NITI Aayog & Sivasubramanian Ramann, Chairman and Managing Director, SIDBI & Mr. Junaid Ahmad, India Country Director, World Bank, observed that banks gained an additional share of 11.6 percent, while Small Finance Banks (SFBs) and Micro Finance Institutes (MFIs) lost almost 5% and 6% respectively for the total gross loans in the micro-credit lending space.
The report was released at the two-day 18th Inclusive Finance India Summit hosted in New Delhi by Access Development Services, a national livelihoods support organisation. Amitabh Kant, CEO, NITI Aayog also recognized individuals & institutions at the Inclusive Finance India Awards 2021 for their exemplary and transformative role of financial inclusion by providing accessible and affordable financial services to the poor, marginalized and weaker section of the society.
The IFI report 2021 highlights on how the pandemic has affected the income and finances of underserved individuals, businesses, and low-income households, while also stating the challenges faced by financial institutions that cater to them. It also underlines that MFIs faced major setbacks in profitability due to the impact of the pandemic. The Return on Assets decreased from 3% to 0.67% while Return on Equity declined from 13.17% in FY 2020 to 1.44% in FY 2021 for MFIs.
However, there were significant improvements in average cost for funds which declined from 11.9% in FY 2020 to 10.9% in FY 2021. MFIs also witnessed a net reduction in operating costs compared to 2020 by more than 50 basis points.
The report also observed an increase in contactless and Aadhaar-based payments by 10% in 2020, the public retention of currency also increased by 22%. It also brings to light the fact that women face relatively higher barriers to using financial services at the bank or the agent point due to their limited mobility and counter-productive gender-based norms, thereby stressing on the need for financial institutions to help women overcome these barriers in the form of Digital Financial Services (DFS), financial literacy as well as Direct Benefit Transfer (DBT) ecosystem.
Speaking at the Inclusive Finance India Summit 2021, Vipin Sharma, CEO, ACCESS Development Services said, “India clocked close to 150 million digital transactions in FY–2021. A record 43.94 crore have opened Jan Dhan Account. In pursuit of ensuring access, let us not forget usage and quality of services as we aim towards universal financial inclusion. Vulnerable customer groups, such as women and the rural population, often have comparatively low literacy rates and lack exposure and access to technology. Women are also typically secondary users of mobile phones, late adopters of technology and are often excluded from having official government IDs. This year, in the Inclusive Finance India Summit, as we deliberate on strategies and action plan of building back better, let us work towards ensuring we leave no one behind and strive for a truly inclusive financial system.”
Sharing his insights at the award ceremony, Amitabh Kant, CEO, NITI Aayog said, “Financial Inclusion in the last seven years has advanced in the country, from very low levels of inclusion to among the top countries. Jan Dhan has been a critical campaign in bringing 43.94 Crore beneficiaries into the fold of formal finance. Now the Government is ambitiously planning to leverage these accounts to deliver many more benefits just beyond emergency transfers. Inclusive Finance India Campaign of ACCESS Development Services has been instrumental in constantly pushing the need of universalizing financial inclusion in India. I am happy that NITI Aayog has been co-host to this initiative for the last 5 years.”
Conceived and co-created by organizations who have a vision for all segments of the population, it is a curated platform for enabling dialogue and learning from innovative policy and practice in the region from global and local sector experts. Some prominent speakers and panellists that were a part of the event included N S Viswanathan, Former Deputy Governor, RBI, Dr Ashok Dalwai, Chief Executive Officer, National Rainfed Area Authority, Department of Agriculture, Cooperation and Farmer’s Welfare, Ministry of Agriculture, Dr G R Chintala, Chairman, NABARD and Greta Bull, Director, Women’s Economic Empowerment, BMGF among others.
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