Indian microfinance sector has grown by over 2,100% in 12 years

The turnover of the Micro Finance Institutions (MFI) industry has increased to Rs 1,264 crore from Rs 17,264 crore in March, 2012. Finance Ministry’s DFS Secretary M Nagaraju was apprised of the cost of Rs 3.93 lakh crore till November 24 by industry representatives during a meeting in New Delhi.

According to MFIs stateholders, the industry has grown by more than 2176 percent in 12 years.

The Finance Ministry said in a release that the DFS Secretary chaired a meeting with leading micro finance institutions. The meeting was also attended by senior officials of DFS along with industry bodies namely MFIN and Sa-Dhan.

The engagement with MFIs was designed to promote open exchange of ideas with the aim of uplifting the MFI sector. The emphasis was on reaching out to low-income families in villages and uplifting their lives by providing them hassle-free financial assistance when they need it.

The participating MFIs reported that the turnover of the MFI industry has increased from Rs. Rs 17,264 crore in March’12. 3.93 lakh crore till Nov’24.

The industry operates in more than 723 districts, including 111 aspirational districts, in 28 states and 8 union territories.

They also cater to the financial needs of approximately 8 crore borrowers. MFIs contribute 2.03 per cent of gross value added to GDP and support 1.3 crore jobs.

Challenges and issues faced by MFIs were also discussed during the meeting. It was reported that MFIs are facing difficulties in raising low cost long-term funds. The quality of MFI portfolio is being affected due to various issues including lack of lending to the sector.

The MFIs requested for formulation of suitable credit guarantee scheme for MFIs/borrowers, creation of special funds/facilities for MFIs operating in the North East region and relaxation of eligible asset norms applicable to MFIs to reduce their risk as compared to other lending. The methods can be diversified.

Secretary, DFS emphasized that MFIs in India need to become more robust, vibrant and financially sound to cater to the needs of the rural masses. he/she said MFIs need to prepare a roadmap to strengthen the sector and become more viable.

It was also pointed out that like digital disbursement, MFIs should encourage repayment of loans digitally and also focus on cyber security and resilient IT infrastructure. They should also strengthen their governance standards.

During the meeting, the DFS Secretary recognized the work done by MFIs in impacting the lives of people in rural areas. he/she said that DFS values ​​the efforts made by MFIs in supporting financial inclusion.