Muthoot Microfin expects to beat its 20% loan growth target this quarter, as falling borrowing costs and steady loan demand lift profitability.

CEO Sadaf Sayeed said the microfinance lender’s profit could climb more than 25% from the previous quarter, with asset quality continuing to improve alongside the growth.

A big part of this comes down to cheaper borrowing. Sayeed said the company is confident of closing the quarter with an overall cost of funds below 10%, likely around 9.9 to 9.95%.

That’s down from roughly 10.1 to 10.15% currently, and the company eventually wants to bring this figure to 9.75% over the long run.

Some of these savings came after Muthoot Microfin raised Rs 250 crore through non convertible debentures at a 9.25% annual coupon, an issue that got snapped up quickly following a recent upgrade to the company’s credit rating.

On the lending side, growth is being driven by more than just the company’s traditional group lending model. Individual loans, gold loans and loans against property are all adding to the mix, alongside the older joint liability group business.

Gold loan disbursements alone are now running close to Rs 130 crore a month, while total monthly disbursements across the company stand at around Rs 1,000 crore.

Asset quality has also held up better than expected. Gross bad loans fell 115 basis points from a year earlier to 3.7%, and the company is now targeting a level below 3% going forward. This builds on a broader turnaround story for the company.

Just a few months earlier, Muthoot Microfin had swung to a net profit of Rs 170 crore in FY26, compared with a loss of Rs 223 crore the year before, driven by similar factors: stronger loan growth, better underwriting and lower provisioning for bad loans.

Sayeed had then described the wider microfinance sector as being firmly past its period of stress.

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