Banks/ NBFCs also do micro finance lending and the vice versa Microfinance institutions also do MSME and other loans. In my view the classification of the lending business should be secured vs a vs unsecured lending. The present problem is shown as the problem segregated to the MFIs only and the other lending businesses are fine. Is it that the problem will not percolate to the other lending businesses and the MFIs will only face the headwinds resulting to the value compression from its peaks of P/BV multiple of 3 to 0.2 ( in an extreme passimism) or MFIs are just ahead of the downward curve in the whole financial sector? As the rate cuts are just round the corner this situation would have been avoidable. Fusion Finance had a picture perfect situation up to FY 24 with ROE of 20%, ROA of 5% along with doubling AUM every alternative years and everything got melted in 4-5 months that too when the rate cut cycle is about to start! Please help me as I am unable to connect the dots. I had a perception that MFIs would do well in the rate cut cycles that doesn’t seem so far.
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