India’s microfinance sector has experienced a remarkable surge, with the outstanding portfolio reaching a staggering Rs 4 lakh crore. This represents a significant increase of 31% year-on-year, according to the CRIF MicroLend report. The robust growth in the sector highlights the increasing importance of microfinance in providing financial inclusion and support to underserved segments of the population.
Impressive Growth Statistics:
The CRIF MicroLend report reveals several key growth indicators within the microfinance sector. The number of active loans witnessed a substantial rise of 23.2% year-on-year, reaching a total of 155 million loans. This demonstrates the increasing demand for microfinance products and services among individuals and microenterprises across the country.
Loan disbursements also experienced a significant uptick, with a growth rate of 27.1% year-on-year. In the December quarter alone, microfinance entities disbursed 18.7 million loans amounting to Rs 89,043 crore. This surge in loan disbursements reflects the sector’s efforts to meet the financial needs of borrowers and foster economic growth at the grassroots level.
Portfolio Quality and Regional Trends:
The report highlights the stability of the microfinance portfolio’s asset quality. As of December 31, the portfolio at risk for more than 30 days past due stood at 2.0%, while the portfolio at risk for more than 90 days past due was at 0.9%. This indicates the sector’s ability to maintain a relatively low level of non-performing assets and manage credit risk effectively.
Bihar emerged as the top state contributing to the sector’s growth, with a significant share in the gross loan portfolio. Notably, the top 10 states accounted for 83% of the national gross loan portfolio, emphasizing the importance of regional dynamics and targeted microfinance initiatives to drive sector growth.
Loan Composition and Market Share:
Analyzing the loan composition within the microfinance sector, approximately 52% of the portfolio of Non-Banking Financial Companies (NBFC) Microfinance Institutions (MFIs) comprised loans with ticket sizes ranging from Rs 30,000 to Rs 50,000. This indicates a focus on catering to the financial requirements of small-scale entrepreneurs and individuals.
In terms of market share, non-banking financial companies lead the microfinance institutions market, holding a portfolio share of 38.3%. They are followed by banks at 33.4%, small finance banks at 17.4%, and diversified non-banking financial companies at 9.4%. This diverse market landscape reflects the collaborative efforts of different financial entities in promoting microfinance and supporting inclusive growth.
Also Read: Microfinance Sector Witnesses Robust Growth: Loan Accounts Surge 9% and NBFC Disbursements Soar 32%
The remarkable growth witnessed by the microfinance sector, with the outstanding portfolio hitting Rs 4 lakh crore, highlights its pivotal role in providing financial access and empowering underserved individuals and microenterprises. The sector’s ability to maintain portfolio quality and meet the diverse financial needs of borrowers is a testament to its resilience and effectiveness. Moving forward, continued investment in microfinance initiatives, along with supportive regulatory measures, will be crucial in promoting inclusive growth, reducing poverty, and fostering sustainable development in India.
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