Microfinance portfolio surging by nearly 31% y-o-y

The significant surge in microfinance portfolio outstanding to reach Rs 4 lakh crore in India reflects the growing importance and reach of microfinance institutions (MFIs) in providing financial services to underserved communities. This substantial increase of 31% underscores the rising demand for microfinance products and services, such as small loans, savings, and insurance, among low-income individuals and small businesses.

A report reveals that a 23.2% year-on-year rise in the number of active loans has been seen, totalling 155 million. This increase indicates a growing demand for microfinance loans among individuals and small businesses in India. Additionally, loan disbursements experienced a significant uptick, climbing by 27.1% year-on-year to reach Rs 89,043 crore in the December quarter. This surge in loan disbursements reflects the efforts of microfinance institutions (MFIs) to meet the expanding financial needs of their clients.

Moreover, microfinance entities disbursed 18.7 million loans during the same period, marking a nearly 10% increase compared to the previous year. This rise in loan disbursements further emphasizes the role of MFIs in extending credit access to a larger segment of the population, contributing to financial inclusion and socioeconomic development.

These statistics underscore the continued growth and impact of microfinance in India, highlighting its significance in providing essential financial services to underserved communities and fostering inclusive economic growth.

Microfinance has proven to be a powerful tool for poverty alleviation and economic empowerment, enabling access to credit for those who are traditionally excluded from the formal banking sector. By extending financial services to marginalized groups, MFIs contribute to fostering entrepreneurship, improving livelihoods, and promoting financial inclusion across the country.

Bihar emerged as the top state by gross loan portfolio, contributing significantly to the sector's growth. Notably, the top 10 states accounted for 83% of the national gross loan portfolio.

However, it's crucial to ensure that the rapid expansion of microfinance is accompanied by responsible lending practices and effective regulation to safeguard against over-indebtedness and exploitation of borrowers. Maintaining transparency, fair interest rates, and adequate consumer protection measures are essential to sustain the positive impact of microfinance on poverty reduction and socioeconomic development in India.

Ms. S Mohini Ratna - Editor VARINDIA