Hyderabad: Microfinance institutions (MFIs) raised an estimated 11,500 crore through the sale of asset-backed securities in the year ended 31 December, double the amount they raised in 2014, according to Crisil Ratings.

This funding route, known as securitization, gained popularity among MFIs after a 2010 crisis set off by tighter regulations in Andhra Pradesh, then the biggest market for small loans to the poor and self-employed. Andhra Pradesh reined in lending by MFIs following reports that coercive loan recovery methods were causing over-extended borrowers to kill themselves.

Banks and investors became averse to funding MFIs as well, prompting them to turn to other funding avenues .

According to Crisil estimates, the overall securitisation market has grown by 60% to 70,000 crore.

“Banks are increasingly using this route to achieve their priority sector lending target. Also, negligible delinquencies and higher yields, have made transactions attractive and helped expand the investor base," said Krishnan Sitaraman, senior director, Crisil Ratings.

According to the Microfinance Institutions Network, the gross loan portfolio of MFIs went up by around 84% between December 2014 and December 2015.

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