.png){kind=logo}
The microfinance industry in India has marked a significant milestone, with its portfolio reaching nearly Rs four lakh crore during the third quarter of the current fiscal year. This development comes as the industry experienced a robust growth of 24.6 % over the previous year, according to a report by the Microfinance Industry Network (MFIN). Additionally, the sector is seeing a return to pre-COVID levels of portfolio delinquency, signaling an improvement in the overall health of the microfinance sector.
Amidst this growth, Non-Banking Finance Company-Microfinance Institutions (NBFC-MFIs) are advocating for a revision in the annual household income criteria for microloan eligibility. Currently set at Rs three lakh, these institutions propose an increase to approximately Rs five lakh.
This request reflects the evolving needs of borrowers and the industry's aim to broaden its support base. The last revision occurred in 2022, aligning rural and urban thresholds at a uniform Rs three lakh, a significant leap from the prior limits of Rs 1.25 lakh and Rs 2 lakh, respectively.
The sector's dynamism is further underscored by the average microfinance loan size, which has seen a considerable increase to Rs 47,374 in the third quarter of FY24, up from Rs 41,123 in the corresponding period of the previous year. This uptick is part of the broader expansion, with the microfinance operations adding over one crore unique clients in the last financial year, boosting the total industry portfolio to Rs 3,99,442 crore.
The microfinance landscape in India also reflects a geographical shift, with South India emerging as the largest contributor to the microfinance portfolio, accounting for 31.14 percent. This change is attributed to significant growth in Telangana and Andhra Pradesh. Meanwhile, the East and Northeast regions, traditionally leading in portfolio outstandings, now contribute 31.06%.
NBFC-MFIs continue to be the backbone of the microfinance sector, holding a 39.1 percent share of the total industry portfolio with Rs 1,56,245 crore in loan amounts outstanding. Following closely are banks and small finance banks, highlighting the diverse ecosystem supporting microfinance in India.
As the microfinance sector navigates through growth and regulatory changes, its resilience and adaptability remain key to addressing the financial needs of underserved communities. The push for revised income criteria reflects a strategic effort to enhance financial inclusion, while the sector's robust growth underscores its critical role in India's economic landscape.
Moreover, as discussions with the Reserve Bank of India progress, the industry remains optimistic about the potential for further expansion and the deepening of its impact on financial inclusion across the country
Join our WhatsApp Channel to get the latest news, exclusives and videos on WhatsApp
_____________
Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.
