Kolkata: Geographical diversification appears to have helped small finance banks (SFBs) in expanding the microfinance business more rapidly as the sector’s revival offered fresh business opportunities, said people aware of the matter.Small finance banks such as Equitas and Ujjivan witnessed a surge in microfinance lending in the first quarter of this financial year, after grappling with market stress for the past two years, while Utkarsh continued to downsize its micro loan exposure, quarterly data showed.To be sure, the unsecured microfinance loans yield higher than the collateral-backed retail loans.Equitas Small Finance Bank reported a 70% year-on-year jump in its microfinance outstanding to Rs 6,019 crore at the end of June against Rs 3,537 crore a year ago. Ujjivan Small Finance Bank recorded a 17% year-on-year expansion in micro loans to joint liability group members to Rs 15,185 crore at the end of the first quarter of the fiscal.“Equitas and Ujjivan are geographically well diversified and have grown the secured book to a sizable number. Now looking at green shoots in the microfinance market with the revival of the sector, they are increasing the share of microfinance,” said Kuntal Sur, partner and leader for risk consulting, financial services and treasury, PwC India.For instance, about 84% of Ujjivan’s lending business is spread across the top 10 states.In contrast, Varanasi-headquartered Utkarsh saw a 36% year-on-year contraction in its microfinance portfolio to Rs 5,480 crore from Rs 8,578 crore. About 72% of its joint liability group-based micro loans are from Bihar and Uttar Pradesh.“Utkarsh is more concentrated in Uttar Pradesh and Bihar with a large microfinance portfolio and therefore it is trying to degrow the portfolio to reduce the concentration risks,” Sur said.ESAF Small Finance Bank, on the other hand, reported a 16% year-on-year rise in micro loans to Rs 8,733 crore at the end of June while its gross advances increased 27.4% to Rs 23,216 crore. AU Small Finance Bank, the largest in this category, saw a 25.8% increase in gross advances to Rs 1.41 lakh crore but it did not provide the breakdown between business verticals.Overall gross advances of Equitas Small Finance Bank increased 26.7% year-on-year to Rs 47,653 crore at the end of June, according to provisional numbers. The bank said the figure might change based on the technical write-off. Ujjivan's gross loans, including the securitised portfolio, increased 28.9% year-on-year to Rs 42,903 crore, while Utkarsh's gross loans stood at Rs 19,612 crore, up 2% year-on-year.