While some firms, like Equitas, have shown declining collection trends, most microfinance institutions reported improved loan growth in Q4 after previous low disbursements.
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The current microfinance cycle seems to be approaching its final phase amid grappling with stressed loans as the asset quality indicators show improvement across various microfinance institutions (MFIs), Investec analysts said.

The analysts expect gradual recovery, leading to consolidation within the sector. Investec emphasised that many players continue to face challenges, including poor asset quality, staff turnover and decreased collection efficiency, and will require capital to stay afloat.

Equitas has shown weaker collection trends in Q4.

Investec analysts cheer CreditAccess Grameen,Ujjivan Small Finance Bank and L&T Finance as top performers in this cycle. However, the efeects of Guardrails 2.0 – taking effect from April 2025 – remains a key factor to monitor. The analysts forsee limited impact on Ujjivan and CreditAccess as they have partially adopted these measures in Q4, and the proportion of clients having four lenders is in single digits.

Most players have reported improvement in loan growth in Q4, after recording lower disbursements and MFIs asset under management (AUM) over the past two quarters.

Investec observed CreditAccess reported 5 per cent AUM growth q-o-q. While Ujjivan’s MFI AUM declined 2 per cent q-o-q, disbursement momentum picked up 38 per cent in the same period.

Maintaining buy ratings on both these players, Investec report highlighted, “Though CreditAccess Grameen is considered by the Street the “gold standard” in microfinance institutions, Ujjivan has performed equally well and is available at lower valuations.”

Published on April 9, 2025