NEW DELHI: The micro finance institutions (MFIs) industry in India has witnessed a skyrocketing growth of more than 2,176 per cent in the past 12 years, with its business soaring from Rs 17,264 crore in March 2012 to Rs 3.93 lakh crore as of November 2024.
This was highlighted during a meeting chaired by M Nagaraju, secretary of the department of financial services (DFS), ministry of finance, in the national capital.
Alongside senior officials from DFS, representatives from key industry bodies, including MFIN and Sa-Dhan, also attended the meeting. The discussions centred on strengthening the MFI sector to better serve low-income households in rural areas, providing them with easier access to financial assistance.
At present, MFIs operate across 723 districts, including 111 aspirational districts, covering 28 states and 8 Union Territories. They cater to the financial needs of nearly 8 crore borrowers, contributing 2.03 per cent to the gross value added (GVA) to India’s GDP and supporting 1.3 crore jobs.
Challenges for the sector
The meeting also threw light to several challenges faced by the sector. MFIs highlighted difficulties in raising low-cost, long-term funds and reported that portfolio quality has been affected by reduced lending to the sector.
The MFIs proposed initiatives such as credit guarantee schemes tailored for MFIs and borrowers, the creation of special funds for operations in the North-East, and relaxed qualifying asset norms to diversify lending risks.
In response, the DFS secretary urged the institutions to develop a roadmap to strengthen the sector and ensure its long-term viability. He further emphasised the need for a vibrant and financially sound MFI ecosystem capable of effectively addressing the needs of rural communities.
The secretary also encouraged MFIs to adopt digital repayment methods while prioritising cybersecurity and resilient IT infrastructure, along with improved governance standards to enhance sectoral credibility.
Acknowledging the significant contributions of MFIs, Nagaraju appreciated their role in advancing financial inclusion and uplifting rural lives. He also hailed DFS’s efforts in supporting the sector and ensuring its growth.
