Jefferies highlights a mixed outlook for the MFI sector, forecasting 18% loan CAGR over the next two years but noting higher leverage and increased overdue loans.
Key Observations:
- The share of loans with four or more lenders has risen to 6% (19% of loans), increasing credit risk.
- Regulatory guardrails limiting loans to three per borrower and enforcing cooling-off periods could cause short-term pain but improve long-term sustainability.
MFIs like Utkarsh, Spandana, and CreditAccess Grameen have higher risk exposure, while Bandhan Bank is better positioned to navigate these challenges. The sector’s performance in the short term will hinge on its ability to adapt to these new norms.
