HSBC has flagged significant headwinds for the microfinance industry following the new lending norms announced by the Microfinance Industry Network, a self-regulatory organization. These restrictions are expected to further slow down AUM (Assets Under Management) growth, which has already been impacted by rising credit costs.
The report points to credit flows drying up in the near term as lenders adjust to the revised caps. HSBC projects a tough environment for the sector in the coming quarters but suggests that clarity may emerge by 3QFY25 as the industry stabilizes. The brokerage underscores that bank-owned microfinance lenders, with their stronger balance sheets and operational frameworks, are better positioned to navigate these challenges.
Overall, HSBC anticipates a cautious outlook for the sector until credit availability and demand dynamics improve.
