The performance of CRISIL-rated securitisation transactions originated by micro finance institutions (MFIs) remains strong, despite the turbulence faced by the MFI sector in recent months. In seven of the nine outstanding transactions, more than 50 per cent of the senior investor payouts have already been made. The investor payouts in three of these transactions are fully covered by cash collateral. Further, the available cash collateral has not been utilised in any of the MFI pools thus far. Says Mr. Raman Uberoi, Senior Director – CRISIL Ratings, “This demonstrates that securitisation transactions which are appropriately conceptualised and structured can benefit issuers and investors alike even during turbulent times.”
Says Mr.Pawan Agrawal, Director – CRISIL Ratings, “The key reasons for the strong performance of CRISIL-rated pools are the robust underlying structural features, including the stipulated credit enhancement mechanism together with the continued strong collection efficiencies maintained by the MFIs in regions other than Andhra Pradesh (Andhra).” These attributes allow the transaction to withstand temporary weaknesses in collection performance without impacting the credit quality of investor payouts.
Seven of the nine outstanding transactions do not have exposure in Andhra, and maintain robust collection performance — they have collection efficiency of more than 99 per cent, and negligible delinquency levels. The two transactions that have exposure in Andhra have also maintained stable overall pool performances, primarily backed by strong collections from other states, although their collection performance in Andhra has been weak.
Also adding to the strong credit profiles of these transactions are robust structural features that allow principal payments to be deferred or advanced to match the actual collections behaviour. Adds Mr. Agrawal, “The deferment enhances the ability of the transaction to withstand any temporary volatility in collections, and the advancement in payment leads to a faster run-down of investor’s exposure to these pools in case of excess collections.”
CRISIL believes that securitisation can provide MFIs with an additional funding option and access to a broader investor base. Based on the collection performance of the pools thus far, and the robust structural features of the transactions, CRISIL believes that the credit protection available to investors in MFI pools rated by it is commensurate with their outstanding ratings. CRISIL continues to closely monitor the collection and structural performance of the MFI pools and will take appropriate rating actions, when necessary.