Microfinance Loans at Rs 4.42 Lakh Crore Need Sustainable Financing to Boost Income Levels

New Delhi [India], October 26:  The ‘Bharat Microfinance Report’ released by Sa-dhan, India’s largest self – regulatory organisation of Impact Finance Institutions, has observed that the micro-finance institutions, particularly the ‘For – Profit’ organisations like NBFC-MFIs, NBFCs and SFBs should follow more caution for ensuring a better quality of assets and growth while exploring the ways of sustainable inclusive finance.  Sa-dhan released the report during its two-day 19^th Sa-dhan National Conference on Inclusive Growth 2024 happening in New Delhi.

Shri Jiji Mammen, Executive Director and CEO of Sa-dhan said, “The micro-finance sector needs to move into a sustainable mode; so as to bring a comprehensive and sustainable development at the bottom of the pyramid. Micro-finance helps millions of poor people to access credit for their various needs, especially for their economic activities, with minimum hassles and an affordable cost. The Bharat Microfinance Report will help in give a new direction for the inclusive agenda by making available credit to the bottom of the pyramid.”

The Report highlighted that the combined loan outstanding of India’s growing microfinance sector stood at ₹ 4,42,700 crore, as outstanding against 1,613 lakh loan accounts, as on 31 March 2024 while the share of different institutions in loan outstanding stood as: NBFC-MFIs: ₹1,73,504 crore (39%); Banks: ₹1,46,909 crore (33%); SFBs: ₹74,712 crore (17%); NBFCs: ₹45,236 crore (10%) and Non-profit MFIs: ₹2,338 crore (1%).

In terms of growth, the total of 33,644 branch network of micro-finance institutions, including NBFCs and BC companies in the country, reached out to over 6,98,000 active micro clients with a total loan outstanding of ₹2,61,239 crore; including a managed portfolio of ₹79,410 crore.

Sa-dhan’s BMR report is based on the detailed analysis of various parameters is based on the information directly sourced from 217 Micro Lending Institutions (MLIs) which represented more than 98% MLI business in the country and also the data sourced the Credit Bureau.

Geographically, the top five states viz. Bihar, Tamil Nadu, Uttar Pradesh, Karnataka and West Bengal contributed 56% to the industry portfolio with Bihar alone accounting for nearly 15% of the total portfolio. The Southern region continued to have the upper hand in the share of loans outstanding, followed by the Eastern region. The proportion of rural clientele was 77% in FY 2023-24 and the women borrowers constituted 99% of the total clientele.

The Report also marked that a reduction of interest rates from 20% per annum to 19.5% per annum will not make a difference in the weekly or monthly installment payment of the poor household. Sa-dhan has also contributed significantly in creating awareness in the financial literacy space where it supported DEA workshops.

Meanwhile, during Sa-dhan’s Conference themed “Driving Sustainable Development through Inclusive Finance’ that concluded in New Delhi, Dr Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation, Government of India, stated the Government had laid down a clear roadmap of ‘Viksit Bharat’ where GYAN – Garib (poor), Yuva (youths), Annadata (the farmer) and Nari (Women) would remain at the center of development and the Government would also focus on bringing additional liquidity into the Microfinance sector in order to strengthen financial inclusion, entrepreneurship at the grassroots levels.

Dr Garg observed that the share of MFIs, NBFCs besides commercial banks had increased significantly over the years and in order to pursue the roadmap of ‘Viksit Bharat’, the Government would also encourage innovation and skill development of the last-mile beneficiaries where MFIs would play a big role.

“In the next 25 years, as part of the Viksit Bharat mission, various initiatives such as innovation, entrepreneurship, women empowerment, WASH (Water, Sanitation and Hygiene), green climate would be the key areas where major Government funding would go and MFIs can contribute,” added Dr Garg.

He further observed that the programmes like NRLM had been well received in the country. “With about 1.44 crore self – help groups where key beneficiaries have been women, the micro-finance movement has contributed significantly. For strengthening the financial sector, more avenues like micro insurance, micro investment would be important in the next three years,” he said.

During the Conference, Sa-dhan also announced a flagship certification course for the Microfinance sector to bring in adequate professional talent into the industry.

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