Arohan Annual Report FY 20-21

The Indian Microfinance industry currently serves 59 Mn (1) microfinance borrowers through a Portfolio Outstanding of INR 3,846 Bn (1) through its Joint Liability Group ( JLG) and Self-Help Group (SHG) models. The industry has come a long way since 2011, when there were 27.59 mn (2) borrowers pan India with a Portfolio Outstanding of INR 181.57 Bn (2) . The industry is projected to reach INR 6,573 Bn (3) by FY 2024-25, as per independent projections from CRISIL. The Indian Microfinance Industry is foundationally robust, has weathered several storms in the past, and has emerged resilient and victorious every single time – providing financial access to millions of excluded individuals at the base of the pyramid in India. When compared to other emerging and developed economies like China, Brazil, the UK and the US – India demonstrates a significantly lower Credit to Gross Domestic Product (GDP) ratio and Household credit as a percentage of the nation’s GDP. With 11% (3) of the world’s unbanked adult population coming from India, there is a significant potential to increase banking habits and overall financial inclusion in India. Moreover, while rural India contributes to 66% (3) of India’s population and 47% (3) of its GDP, only 9%(3) of total credit outstanding in the country comes from rural India. This is again indicative of opportunities for microfinance institutions to significantly further financial inclusion in rural India. As per the independent results published by CRISIL, India has 14 low-income states, which exhibit lower CRISIL Inclusix Scores, pointing Industry Overview in FY2020-21 towards poor financial inclusion in those states. It is further ratified by CRISIL that there is extremely low per-capita retail credit and low share of banking credit in the Eastern, Central and North-Eastern states of India. These provide enormous opportunities to the microfinance industry towards financial inclusion, a key national priority. As observed in the past, every crisis the Microfinance Industry has faced has invariably led to the strengthening of the industry itself in India. The COVID-19 pandemic was no different in this regard, providing an opportunity for the industry to better its operating processes and systems, making it even more resilient. Financial Year (FY) 2020-21 has been an exceptional year, having witnessed the onset and subsequent spread of the global pandemic of COVID-19. In India, however, despite the nation-wide lockdown in March 2020, the phase wise re-opening of lockdown, gradual rebooting of the Indian economy and proactive measures taken by the industry, resulted in steady restoration of normalcy. The resilience of the customer segment that the industry caters to, once again, shone through as customers worked actively in support of the various timely interventions by the Government, the RBI and the industry, to revive their livelihoods and reinstate credit discipline. By Quarter 3 of the Financial Year, the overall financial inclusion industry saw significant improvement in collections month-on-month and projections showed a steady recovery to pre-COVID times. Source of data for Industry Overview: (1) MFIN Micrometer, Issue 37 (2) MFIN Micrometer, Issue June, 2012 (3) CRISIL Industry Report Management Discussion & Analysis 33