Microfinance Sector Witnesses Robust Growth: Loan Accounts Surge 9% and NBFC Disbursements Soar 32%

The microfinance sector in India is experiencing a remarkable surge in loan accounts, with significant growth indicators across various metrics. Let’s delve into the latest developments:

Loan Accounts Reach New Heights

As of December 31, 2023, the number of microfinance loan accounts serviced by micro lenders has witnessed a 9% year-on-year increase, totaling an impressive 140.8 million accounts. This surge reflects the growing demand for microfinance services, especially among underserved communities.

Diversified NBFCs Lead the Way

Notably, diversified non-banking financial companies (NBFCs) have played a pivotal role in driving this growth. Their microfinance disbursements surged by an astounding 32% year-on-year during the December quarter, marking the highest growth rate among all players. These NBFCs have become a critical force in expanding financial inclusion and empowering small borrowers.

Banks and NBFC-MFIs Join the Momentum

Banks also witnessed a substantial increase in disbursements, rising by 27% year-on-yearduring the same period. Meanwhile, NBFC-MFIs(microfinance institutions) experienced a commendable 15% increase in disbursements. However, small finance banks (SFBs) saw a more modest rise of 4%, and disbursements by non-profit MFIs declined by 17%.

Regional Insights

The majority of microfinance activity remains concentrated in specific states, including Bihar, Tamil Nadu, Uttar Pradesh, Karnataka, and West Bengal. Collectively, these states account for 57% of the industry’s portfolio. Bihar stands out, boasting a substantial loan portfolio totaling Rs 58,706 crore as of December 31. The expansion of microfinance services to underserved regions remains crucial for sustaining this momentum.

Positive Trends in Asset Quality

Despite the rapid growth, there are encouraging trends in asset quality. The portfolio at risk for loans overdue by more than 30 days decreased to 2.24%, down from 3.43% year-on-year. Similarly, the portfolio at risk for loans overdue by more than 60 days improved to 1.63%, compared to 2.60% in the previous year.

Also Read:UPI Transactions Surge: India Digital Payments Report H2 2023

Experts’ Outlook

Industry experts laud the microfinance sector’s overall performance, emphasizing its consistent growth over the past two quarters. They anticipate this positive trajectory to continue in the coming years. However, they stress the importance of expanding microfinance services to reach even more underserved regions.

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Source: Microfinance loan accounts jump 9% to 14 crore as NBFC disbursements surge 32%