Small cos big players in microfinance loans

The business of microfinance companies is rapidly growing in the country. After the introduction of new regulatory frameworks for small loans, the microfinance industry (MFI) has witnessed a growth of 22 percent. This is a positive message for the Indian economy. Non-Banking Financial Companies (NBFCs) have left banks behind in terms of providing small loans. According to the MicroMeter report by MFIN, as of March 31, 2023, the microfinance industry has reached ₹3,48,339 crores. Not only that, but NBFC-MFI has secured its position as the largest microfinance provider with a 39.7% stake.

The microfinance industry has provided loans to 6.6 crores unique borrowers through 13 crores loan accounts, totaling a loan portfolio (GLP) of ₹3,48,339 crores. There has been a 22% annual growth rate in GLP compared to the previous year. NBFC-MFI is the largest microcredit provider to low-income individuals and groups. It holds a 39.7% share in the total industry portfolio. Banks hold 34.2% and Small Finance Banks (SFBs) hold a 16.6% share. According to the report, active microfinance loan accounts have increased by 14.6% and reached 13 crores.

What are microfinance companies?
Microfinance companies are financial institutions that provide financial services on a small scale. They cater to small-scale entrepreneurs who cannot access loans due to the complex processes of banks. Microfinance companies are a better alternative for such individuals. They provide small loans to various small businesses or families who do not have access to formal banking channels or are ineligible for traditional loans. Typically, loans below ₹50,000 are given for rural areas, and the limit is ₹1,25,000 for urban areas.