Finance company Arman Financial Services announced Q3FY25 results Company’s consolidated Asset Under Management (AUM) stood at ~Rs 2,280 crore Disbursements for Q3FY25 stood at ~Rs 338 crore PPoP for Q3FY25 de-grew by 5% year-on-year to ~Rs 69 crore. PAT for Q3FY25 stood at Rs -7.3 crore. Jayendra Patel, Vice Chairman & Managing Director, Arman Financial Services said, “Over the past few quarters, the microfinance sector has faced a challenging landscape, impacting both operational efficiency and financial stability. Key issues such as overleveraging, weakening of center discipline, deterioration of the Joint Liability Group (JLG) model, and rising employee attrition have adversely affected collection efficiency. High attrition, particularly among field staff, has disrupted borrower engagement—critical for ensuring timely repayments and maintaining portfolio quality. Furthermore, the post-COVID euphoria among MFIs and, especially, non-MFI lenders in the retail unsecured space, coupled with a favourable regulatory environment, has significantly increased household indebtedness, despite limited real-income growth. This has further strained borrowers' ability to meet repayment obligations, resulting in higher delinquencies and a subsequent rise in impairment costs across the industry. These challenges have directly contributed to increased default rates and financial stress within the sector. In response, both the company and the industry have made significant efforts to strengthen underwriting standards and reduce customer leverage. Naturally, this has led to higher rejection rates and lower disbursements. Additionally, the increased focus on collections has stretched field bandwidth, further impacting sourcing and exacerbating staff attrition. As a result, disbursements and AUM have declined. However, the company remains well-capitalized and has not faced any restrictions in credit flows from banks or financial institutions. The evolving macroeconomic conditions have intensified pressures on microfinance institutions, necessitating a strategic recalibration of business models. The industry-wide AUM degrowth has also created liquidity issues for microfinance borrowers, which need to stabilize before the cycle reaches equilibrium. Result PDF