Microfinance Institutions Witness 2176% Growth, Eye Robust Future

Microfinance institutions in India have experienced a dramatic growth of 2176% over 12 years, reaching Rs. 3.93 lakh crore by November 2024. A meeting in New Delhi highlighted their pivotal role in rural financial inclusion, while addressing challenges like funding issues and advocating for strengthened governance and digital repayment methods.

In a remarkable trajectory of growth, India's microfinance institutions (MFIs) have escalated their business from Rs. 17,264 crores in March 2012 to an impressive Rs. 3.93 lakh crore by November 2024, a leap of 2176% in 12 years. This monumental rise was the focal point of discussions during a meeting chaired by M Nagaraju, Secretary, Department of Financial Services (DFS) in the Ministry of Finance, held in New Delhi. The assembly included senior DFS officials and representatives from leading industry bodies such as MFIN and Sa-Dhan.

The meeting emphasized the critical role of MFIs in reaching low-income households across India, particularly in rural areas, to uplift lives through accessible financial support. With a presence in 723 districts, including 111 aspirational districts across 28 states and 8 Union Territories, MFIs cater to almost 8 crore borrowers, contributing significantly to the GDP and supporting over 1.3 crore jobs. Despite their successes, MFIs face challenges, including difficulties accessing low-cost long-term funds and impacts on portfolio quality due to reduced sector lending.

Participants advocated for credit guarantee schemes tailored to MFIs and the creation of special funds for those operating in the North East. Secretary Nagaraju stressed the need for MFIs to bolster their financial robustness, governance, and transition to digital operations, which includes digital loan repayments and enhancing cybersecurity. Praising their role in financial inclusion, the DFS expressed its support for the sector's continued growth and innovation.

(With inputs from agencies.)