Microfinance cos’ ECB more than halve in FY21 April 16, 2021 Sharp decline in fresh disbursements, competitive interest rates key reasons After a steady growth in last few years, external commercial borrowings (ECBs) of domestic microfinance companies have more than halved in FY21 amid a sharp decline in fresh disbursements, coupled with ample liquidity and competitive interest rates in the domestic market. According to RBI data, overseas borrowing of microfinance institutions (NBFC-MFIs) fell to $59.29 million between April 2020 and February 2021. In contrast, their borrowing during the corresponding period last year stood at $137 million. “One of the primary reasons (for lower borrowing) could be the overall cut back on fresh disbursements by MFIs, especially in the first two quarters of FY21,” said Aastha, Partner, Argus Partners, adding: “Microfinance borrowers, having been the worst hit by the pandemic and the consequent lockdown, were unable to repay their loans and the collection operations (largely cash-based) of MFIs also took a major hit. These liquidity issues would have led MFIs to go slow on lending and conserve capital.”