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An Evaluative Study of NBFC-MFIs in India
Conference Paper · March 2018
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International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
An Evaluative Study of NBFC- MFIs in India
1. Ms. Aisha Badruddin

Integral University
2. Dr. Mohd Anees
University Of Lucknow
ABSTRACT
The study is based on evaluation of the performance of NBFC form of MFIs in India. Amongst all the legal forms of
MFIs microfinance in India is largely dominated by Non-Banking Financial Companies-Microfinance Institutions
(NBFC-MFIs). NBFC-MFIs are regulated by Reserve Bank of Indiaalong with two Self-regulatory Organizations (SROs)
– Sa-Dhan and MFIN. The study builds on the data gathered from MFIN. The underlying objective of research is to
perform ratio analysis of small, medium and large NBFC-MFIs and to study the level of outreach and portfolio of small,
medium and large MFIs. MFIs have been classified on the basis of GLP as suggested by MFIN.The ratio analysis shows
that smaller MFIs are facing challenges as compared to other categories of MFIs especially in terms of debt funding as
depicted by Debt to Equity ratio, in proportion to the equity available to them. Operating Self Sufficiency for all
categories is favorable. MFIN in their report mention demonetization as the main reason resulting in decline in the
Return on Assets.
KEYWORDS:NBFC-MFI, GLP, Outreach and Portfolio.
INTRODUCTION
Microfinance Industry in India is largely dominated by Non-Banking Financial Companies-Microfinance
Institutions (NBFC-MFIs). NBFC-MFIs are regulated by Reserve Bank of India (RBI). There are also two
Self-regulatory Organizations (SROs) – Sa-Dhan and MFIN(SIDBI, 2016). An indicator of the remarkable
growth in the sector is the comparison of the ratio of microfinance loans to the GDP (Gross Domestic
Product), which is low even in mature markets such as India, Philippines and Indonesia. However, going by
the sheer size in microfinance loans, India lead with gross loan portfolio of USD 12.3 billion for MFIs.
Bangladesh is high not only in the size of the microfinance loan portfolio but also in the contribution of this
loan size to GDP(MFIN, 2017). The client outreach of MFIs in the industry across all forms of MFIs had
grown substantially from 2005 to 2011, attaining a level of 317 lakh. This trend decelerated during 2012 and
2013 and the count of clients decreased to 275 lakh. The trend reversed in 2014 with a growth and reached a
level of 330 lakhs. This trend continues in 2016 with a massive rise in clients of 399 lakh. A huge chunk of
these clients are being catered by NBFCs (NBFC/NBFC-MFIs) 79% whereas Section 8 Companies account
for 5% and others (Society/Trust/MACS) accountfor 16%. MFIs with outstanding portfolio above Rs. 500
crore are responsible for reaching out to 80% of theclients in the industry (Bharat Microfinance Report, 2017).
Market share within the NBFC-MFIindustryisclearlyconcentrated inthegroupoflargeMFIs,
whichaccountfor90%oftheindustryGLP,88%oftheclientbase,90%ofloanamountdisbursedand87%ofdebtfundin
g (Micrometer, 2017). The share ofNBFCs-MFI, although accounting for only about 3 per cent of the NBFC
sector’s assets at end-March 2017, has shown a steady rise since their inception (RBI, 2017).
RESEARCH METHODOLOGY
The research is based on the data of NBFC-MFIs from the year 2014-2017.Thedata has been collected from
the various publications of MFIN. The ratios have been used for evaluating the performance of small, medium
and large NBFC-MFIs in India.
941 Ms. Aisha Badruddin, Dr. Mohd Anees

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
RESEARCH OBJECTIVES
 To evaluate the performance on the basis of ratios of small, medium and large NBFC-MFIs.
 To study the level of outreach and portfolio of small, medium and large MFIs
DATA ANALYSIS
The categorization of MFIs done by MFIN is based on their Gross Loan Portfolio (GLP) at the end of FY 16-
17 (as of 31st March 2017)hence, the data collected by MFIN in Microscape 2016,constitute 7 MFIs with
GLP < Rs 100 Cr, 20 MFIs with GLP > Rs 100-500 Cr and 14 MFIs with GLP > Rs 500 Cr for the FY 2016-
17. The list of MFIs under different peer groups included for analysis isgiven in table 1. All MFIs for the year
2014-15 include 38 MFIs out of which 5 MFIs are small, 19 medium and 14 large. In the year 2015-16 total
reporting MFIs were 40 comprising of 6 small, 20 medium and 14 large MFIs. Year 2016-17 all MFIs were 41
in number with 7 small, 20 medium sized and 14 large sized MFIs.The top ten MFIs as reported by MFIN in
Microscape 2016-17 for three years respectively are mentioned in table 2.
Table 1. Peer Grouping
Annapurna,Arohan ,Asirvad ,Belstar ,BFIL, BSS, Fusion, Grameen Koota, Madura
MFIs (large)
,Muthoot Microfin, Satin Sonata, Spandana, SVCL
Adhikar, Chaitanya, Growing Opportunity, Hindusthan, Fino, Jagaran, M Power,
MFIs (medium) Margdarshak , Midland, Namra, Navachetna, Pahal, Saija, Samasta, Sambandh,
Svatantra ,Uttrayan, Varam, Vedika, VFS
Agora, Light, MSM, Nightingale, Shikhar, Unnaco, Unnati.
MFIs (small)
Source : Microscape 2016-17, MFIN

Table 2. Peer Grouping For Top 10 MFIs
BFIL, Satin, Grameen Koota, Spandana, Sonata, SVCL, Annapurna, Arohan, Madura,
FY 14-15
Asirvad
BFIL, Satin, Grameen Koota, Spandana, Sonata, SVCL, Asirvad, Annapurna, Arohan,
FY 15-16
Muthoot Microfin
BFIL, Satin, Grameen Koota, Muthoot Microfin, Asirvad, Spandana, Annapurna, Sonata,
FY 16-17
Arohan, Fusion
Table 3. Ratio Analysis
DEBT TO EQUITY RATIO
YEAR ALL TOP 10 SMALL MEDIUM LARGE
FY 14-15 4.3 4.3 3.7 3.6 4.4
FY 15-16 5.2 5.2 4.1 5.2 5.2
FY 16-17 4.3 4.2 3.5 4.7 4.3
OPERATING SELF SUFFICIENCY (%)
FY 14-15 118.56 121.07 99.12 106.87 120.53
FY 15-16 118.67 121.07 106.65 107.24 120.74
FY 16-17 111.34 112.21 104.60 106.38 112.29

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
RETURN ON ASSETS (%)

FY 14-15 1.32 2.99 -2.11 1.29 2.81
FY 15-16 2.28 3.32 1.99 1.82 3.20
FY 16-17 1.77 2.05 1.04 1.80 2.14
RETURN ON EQUITY (%)
FY 14-15 8.65 14.43 1.26 7.44 13.75
FY 15-16 13.98 18.82 9.83 12.47 18.92
FY 16-17 12.73 12.17 6.31 14.56 13.43
BALANCE SHEET PORTFOLIO/ASSET RATIO (%)
FY 14-15 69 68 72 71 68
FY 15-16 75 74 66 76 74
FY 16-17 72 72 70 73 72
BALANCE SHEET PORTFOLIO/GROSS PORTFOLIO RATIO (%)
FY 14-15 78 76 95 85 77
FY 15-16 75 73 67 82 74
FY 16-17 87 87 80 83 87
YIELD ON GROSS PORTFOLIO (NOMINAL) (%)
FY 14-15 22.35 22.83 23.26 21.84 22.83
FY 15-16 24.44 23.80 24.62 24.74 23.84
FY 16-17 24.07 22.91 24.37 24.56 23.09
TOTAL EXPENSE/PORTFOLIO (%)
FY 14-15 23.50 22.00 28.98 22.99 22.07
FY 15-16 24.33 21.83 24.85 25.68 21.76
FY 16-17 24.56 23.40 26.09 24.90 23.11
FINANCIAL EXPENSE/PORTFOLIO (%)
FY 14-15 12.44 13.95 11.88 11.73 13.86
FY 15-16 14.56 14.04 12.32 15.70 13.98
FY 16-17 15.02 13.65 15.25 15.79 13.62
OPERATING EXPENSE/PORTFOLIO (%)
FY 14-15 10.27 7.24 16.13 10.51 7.42
FY 15-16 8.85 6.88 11.61 9.02 6.96
FY 16-17 8.22 6.87 10.13 8.32 6.96

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
ADMINISTRATIVE EXPENSE/ASSETS (%)

FY 14-15 3.93 2.62 5.58 4.32 2.58
FY 15-16 3.27 2.41 3.74 3.65 2.35
FY 16-17 2.89 2.26 3.33 3.12 2.25
PERSONNEL EXPENSE/ASSETS (%)
FY 14-15 6.34 4.62 10.55 6.19 4.84
FY 15-16 5.59 4.47 7.87 5.37 4.61
FY 16-17 5.33 4.61 6.80 5.20 4.70
COST PER CLIENT
FY 14-15 810 801 1,199 844 800
FY 15-16 845 820 1,154 913 829
FY 16-17 1,024 992 1,367 1,134 1,000
GROSS LOAN PORTFOLIO TO TOTAL ASSETS (%)
FY 14-15 77.9 76.16 95.29 84.76 76.83
FY 15-16 74.9 73.12 67.40 81.67 74.06
FY 16-17 86.5 86.56 80.38 83.17 87.15
WRITE-OFF RATIO (%)
FY 14-15 0.31 0.84 0.22 0.10 0.70
FY 15-16 0.16 0.23 0.23 0.10 0.21
FY 16-17 0.31 0.67 0.06 0.24 0.59
LOAN LOSS PROVISION RATIO (%)
FY 14-15 0.79 0.81 0.97 0.75 0.78
FY 15-16 0.91 0.91 0.91 0.97 0.83
FY 16-17 1.31 2.88 0.71 0.79 2.54
DISCUSSION
The result of ratio analysis represented in table 3 is used to interpret the performance of MFIs under various
categories. Debt to Equity Ratio shows that medium and large MFIs are performing well in terms of leverage.
Smaller MFIs are still facing challenges for debt funding in proportion to the equity available to them as
compared to all other categories of MFIs.Operating Self Sufficiency(OSS) for all categories is favorable.
Operational Self Sufficiency (OSS) ratio shows that as compared to last year, small and medium MFIs have
been able to maintain their OSS with slight fall (1% to 2%). However, large MFIs show a drop of almost
8.45% in OSS.Return on Assets It is noteworthy that MFIs in all categories have recorded positive a Return
on Asset (ROA) in FY 16-17, though there is a slight drop in the ROA as compared to FY 15-16. Overall

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
industry ROA is 1.77% whereas for the large MFIs it is more than 2%. However, the small MFIs are facing
some challenge on this front. Return on Equityin FY 16-17, the ROE remained positive across all MFI
categories, though there has been a decline of 3.52% and 5.49% in small and large MFIs in comparison to
previous year.Balance Sheet Portfolio/Asset Ratio and Balance Sheet Portfolio/Gross Portfolio ratio show an
increase of 3% and 9% from 2014-17 with decrease in the year 2015-16 in all MFIs.A slightly low ratio of
Yield on Gross Portfolio (nominal) is observed in large category than small and medium. Otherwise all the
MFIs in various categories seem to be profitable in the year 2016-17. Total Expense/Portfolio ratio is highest
in small amongst all categories.Financial Expense/Portfolio ratio in all MFIs has increased almost 3% in three
years. The small MFIs category has increased ratio of 3.37% from 2014-2017. The large MFIs have no
significant change in the ratio over the time. Operating Expense/Portfolio ratio has decreased 6% and almost
2% for small and medium MFIs over three years. The large MFIs have maintained consistency with no change
in the ratio within two years.Personnel Expense/Assets ratio shows a fall of 3.75% from 2014-2017 for small
category with not much change for medium and large category.Cost per Client has increased consistently over
three years in large and medium category of MFIs. It has decreased in the year 2015-16 in small MFIs
category which has again increased in next year.Gross Loan Portfolio to Total Assets ratio shows a significant
increase of 12.98% in FY 2016-17 in case of small sized MFIs and 13.09% for large MFIs.The write-off ratio
shows a steep fall in the year 2016-17 for small MFIs but has increased in case of medium MFIs in the same
year.Loan Loss Provision Ratio it is highest in FY 2016-17 for all MFIs included in the sample. It is reported
as highest in case of large MFIs in the year 2016-17 with no significant difference between the ratio of small
and medium MFIs.
ANALYSIS FOR LEVEL OF OUTREACH

The outreach indicators suggested by MFIN are Number of branches, employees, loan officers and Clients.
Client outreach and loan portfolio are two key indicators of an MFI’s contribution to financial inclusion as
well as the depth and breadth of financial deepening achieved by it (Bharat Microfinance Report, 2017).
Table 4. Outreach Indicators

BRANCHES
Year MFIs (All) MFIs (top 10) MFIs (small) MFIs (medium) MFIs (large)
FY 14-15 3,532 2,620 59 723 2,750
FY 15-16 4,795 3,534 98 1,014 3,683
FY 16-17 6,346 4,530 141 1,422 4,783
EMPLOYEES
FY 14-15 27,014 21,085 474 4,370 22,170
FY 15-16 40,802 31,862 752 7,019 33,031
FY 16-17 56,360 42,571 998 10,819 44,543
LOAN OFFICERS
FY 14-15 15,529 12,050 207 2,654 12,668
FY 15-16 24,601 19,450 383 4,093 20,125
FY 16-17 34,491 26,459 582 6,401 27,508
CLIENTS (Cr)
FY 14-15 0.97 0.79 0.01 0.13 0.83
FY 15-16 1.42 1.16 0.02 0.20 1.20
FY 16-17 1.79 1.45 0.02 0.26 1.51

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
DISCUSSION
Table 4 constitutes the outreach indicators for three consecutive years under small, medium and large category
of MFI. The number of branches in small MFIs has increased 66% and 44% in the year 15-16 and 16-17
respectively. The medium MFI continues with 40% increase in both the years and 34% and 30% in large MFIs
for 15-16 and 16-17 respectively. In the year 2016-17 the industry shows an increase in the count of
employees in all the categories of MFIs. All MFIs shows a rise of 13% and 17% in Top 10 MFIs. The highest
percentage change of 26%, is observed in small MFIs categories as compared with others. The number of loan
officers also depicts percentage change of 85%, 54% and 59% in the FY 2015-16 in small, medium and large
categories respectively. A percentage change of 52%, 56% and 37% was observed in small, medium and
large MFIs in the year 2016-17. In the number of clients the highest percentage change of 75% was seen in
FY 2015-16 in the category of small MFIs. The top ten MFIs experienced a change of 25% in FY 2016-17.
Table 5. Analysis of Portfolio
GLP (Cr)
FY 14-15 13,741 11,438 129 1,348 12,264
FY 15-16 25,028 19,988 282 2,867 21,880
FY 16-17 31,640 24,739 326 3,811 27,504
AVERAGE LOAN OUTSTANDING PER CLIENT (Rs)
FY 14-15 12,654 13,188 12,129 11,950 13,797
FY 15-16 15,396 16,359 14,501 15,178 16,091
FY 16-17 15,042 16,027 13,895 14,558 16,307
AVERAGE LOAN AMOUNT DISBURSED PER ACCOUNT (Rs)
FY 14-15 16,004 15,657 16,059 15,747 16,332
FY 15-16 19,098 18,138 19,357 19,253 18,765
FY 16-17 22,040 19,735 23,389 22,566 20,615
Source: Microscape 2016-17, MFIN
DISCUSSION
Portfolio indicators as suggested by MFIN include Gross Loan Portfolio (GLP), Average Loan Amount
Disbursed per Account and Average Loan Outstanding per Client (ALOPC). Table 5. shows analysis of
portfolio of small, medium and large MFIs on various portfolio indicators.The year on year (YoY) change in
the loan portfolio was 118%, 113% and 78% in the FY 15-16 and 16%, 33% and 26% in small, medium and
large MFIs respectively.In the FY 2016-17 a drop in ALOPC is observed in small and medium category with
percentage change of -4% in both the categories. An increase of 1% is seen in large MFIs. A change of 21% is
observed in both the years in small MFIs, in medium MFIs it was 22% and 17% in FY 2015-16 and 16-17
respectively and large category of MFIs experienced a year on year change of 15% and 10% in both FY
respectively.
CONCLUSION
The ratio analysis result shows that smaller MFIs are facing challenges as compared to other categories of
MFIs especially in terms of debt funding as depicted by Debt to Equity ratio, in proportion to the equity
available to them. MFIN in their report mention demonetization as the main reason resulting in decline in the

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 5, Issue 3
March 2018
Return on Assets(Microscape, 2016-17).The operating and personnel expense ratio remained steady in all
categories except Small size MFIs. NBFC MFIs in terms of outreach MFIs have shown consistent growth.
The NBFC-MFI segment of NBFCs is considered as a very significant part in the entire Financial Inclusion
scenery of India. NBFC-MFIs being the differentiated segment of NBFCrepresent the substantial growth in
size and level of outreach.
REFERENCE
[1]. MFIN, Microfinance in Asia A mosaic future outlook, http://mfinindia.org/wp-content/uploads/2017/10/MFIN-
FINAL-by-PwC.pdf
[2]. The Bharat Microfinance Report 2017, Published by Sa-dhan,http://indiamicrofinance.com/wp-
content/uploads/2017/12/The-Bharat-Microfinace-Report-2017-Final.pdf
[3]. SIDBI, Voices of Microfinance clients-A study of microfinance clients’ concerns, perceptions and delights,
Published by ACCESS-ASSIST https://www.sidbi.in/downloads/Voices-of-Microfinance-Clients-FINAL.pdf,
November 2016
[4]. The Microscape 2016-17,published by MFIN,http://mfinindia.org/wp-content/uploads/2018/01/Microscape-FY-
16-17_01.01.18.pdf
[5]. Micrometer 2017, Issue 24, published by MFIN, http://mfinindia.org/wp-content/uploads/2018/02/Micrometer-
Issue-24_Q3-FY-17-18_Final.pdf
[6]. RBI, https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=17147, October 2017
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An Evaluative Study of NBFC-MFIs in India

Conference Paper · March 2018

Micro Finance View project

The user has requested enhancement of the downloaded file.

An Evaluative Study of NBFC- MFIs in India

1. Ms. Aisha Badruddin

941 Ms. Aisha Badruddin, Dr. Mohd Anees

Source : Microscape 2016-17, MFIN

942 Ms. Aisha Badruddin, Dr. Mohd Anees

RETURN ON ASSETS (%)

943 Ms. Aisha Badruddin, Dr. Mohd Anees

ADMINISTRATIVE EXPENSE/ASSETS (%)

944 Ms. Aisha Badruddin, Dr. Mohd Anees

ANALYSIS FOR LEVEL OF OUTREACH

Table 4. Outreach Indicators

945 Ms. Aisha Badruddin, Dr. Mohd Anees

946 Ms. Aisha Badruddin, Dr. Mohd Anees

947 Ms. Aisha Badruddin, Dr. Mohd Anees

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