Microfinance Institutions (MFI) witnessed 10% growth in average loan

Size; proportion of women customers increased marginally at 99%: Inclusive Finance India Report

The annual “Inclusive Finance India Report,” tracks financial inclusion progress through analysis of various government policies and last-mile challenges

The microfinance sector saw structural change in the last six years when leading Microfinance Institutions (MFI) became banks and SFBs, thus reducing the footprint of MFIs.

New Delhi, January 17: The microfinance sector grew at a fast pace in 2010-11, however the sector was severely affected by demonetisation disruptions in 2016-17 and also the account of some MFIs becoming banks and their data getting excluded from the MFI segment. According to a report by ACCESS Development Services titled the – Inclusive Finance India report – the shift of portfolio towards Microfinance Institutions (MFIs) during FY-22 was distinct. in. The report was launched at 19th India Inclusive Summit 2023 edition by N S Vishwanathan, Former Deputy Governor, Reserve Bank of India (RBI) covers a review of the performance of diverse institutional structures and delivery models in inclusive finance. The research highlights that while the share of outstanding loans of all banks decreased from 58.4%in 2021 to 56% in 2022, that of MFIs increased from 30.6% to 36%.

In terms of state-wise distribution of microfinance, the top 5 states accounted for 59% of outstanding loans in FY 22, which is lower than the level of 62% in 2021. This decline indicates wider dispersion of MFI loans and thereby reduced concentration risk. Assam, recovering from the recent years of crisis, posted a negative growth of 32.6%. Extreme state action results in a scarcity of credit for microfinance customers; this was the experience of AP and Telangana after the 2010 crisis. Against the national growth rate of 19% in portfolio outstanding, two major states recorded very low growth – West Bengal (2.72%) and Punjab (3.36%).

Commenting on the report, N. Srinivasan, Former Deputy Governor, Reserve Bank of India (RBI) and author of the Microfinance chapter said, “The sector has put the COVID disruptions firmly behind and is going ahead with positive intent. The future outlook seems much better, as indicated by industry leaders. With several pathways available such as business correspondents, mergers, transforming into banks and foray into non-microfinance loans, MFIs have a lot of work to do as they ride into the future”

The report further shares that while customer protection has evolved as a major foundational aspect of new regulations introduced by the government, but these may not be enough in the context of customer satisfaction. Improvements to loan products, aligning loan features to the purposes for which loans are taken and responsiveness to changing needs of customers are all priorities of a future in which customer centricity will be a prime driver of competitive differentiation.

The unveiling of the report witnessed industry leaders from across the sectors. To name a few Hitendra Dave, Chief Executive Officer, HSBC India, V Vaidyanathan, Managing Director & CEO, IDFC First Bank, Kalpana Ajayan, Regional Head – South Asia, Women’s World Banking (WWB); Umanath Mishra, Director, CRISIL Foundation; Prakash Kumar, Chief General Manager, SIDBI and Arinjoy Dhar, Senior Director Microfinance, BRAC.

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