ICRA upgrades ratings of three MFIs
Mumbai: Rating agency ICRA has upgraded ratings of three microfinance institutions, Grameen Financial Services, Ujjivan Financial Services and Utkarsh Microfinance.
"The upgrade for these NBFCs (focused on micro finance lending) reflects likely improvement in the resilience of their earnings, superior ability to scale up as well as strengthened capacity to control asset quality," it said.
Giving the rationale behind such rating upgrade, the agency said factors like clarity in regulations, internal changes at the individual MFIs and ability of MFIs to regain the confidence of equity investors as reflected in the equity infusions post-Andhra crisis influenced the upgrade.
"Clarity in regulatory environment, reduction in risk due to regulatory restrictions on overall leveraging of the borrower as well as data sharing through credit information bureaus augur well for asset quality of MFIs," it said.
The rating agency also noted that the upgraded MFIs are likely to report reasonable returns at 10 percent interest margins.
On the whole, the agency said the outlook of lenders and investors on the sector improved in FY13. "Several MFIs are able to raise equity from existing or new investors in FY13. Overall in FY13, at least 14 investors brought in equity in at least nine MFIs," it said.
ICRA also noted that post the RBI guidelines of May 2011, which places a ceiling on lending rates and interest margins, MFIs have taken several initiatives to reduce operating cost.
It, however, said return on equity for MFIs is likely to register only a moderate improvement because of the interest rate ceiling.
With the improvement in operational environment, MFIs are also expected to venture into individual loans and other secured and unsecured loan products, while remaining focused on politically and communally sensitive borrower groups, it added.