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India's microfinance sector projected to grow by 12-15 pc in FY26

IANS April 28, 2025 357 views

India's microfinance sector is poised for steady growth in the upcoming fiscal year, with projections indicating a 12-15% expansion. The industry has shown remarkable resilience, serving nearly 8 crore borrowers across the country's districts. Recent regulatory guardrails are expected to enhance credit quality and discipline, despite potential short-term operational challenges. The sector remains committed to its core mission of financial inclusion, particularly for rural and underserved populations.

"The microfinance sector is at a pivotal point, balancing sustainable growth with responsible lending" - Mahendra Patil, MPFASL Founder"
India's microfinance sector projected to grow by 12-15 pc in FY26
Mumbai, April 28: The micro-finance sector (MFI) in India is projected to grow by 12–15 per cent in FY26 under a conservative scenario, returning to FY24 levels, a report showed on Monday.

Key Points

1

Microfinance sector serves 7.9 crore unique borrowers across 92% of districts

2

Cautious 12-15% growth projected for FY26

3

Sector demonstrates 28% CAGR from FY14 to FY24

4

MFIN guardrails aim to improve credit discipline

In a more favourable environment, particularly if rural incomes recover on the back of a normal monsoon, growth could be a tad better, said MP Financial Advisory Services LLP (MPFASL) in its report.

The MFI sector has consistently demonstrated resilience, having recovered from past disruptions such as demonetisation and the COVID-19 pandemic.

India’s microfinance sector has become a cornerstone of financial inclusion, enabling credit access for underserved populations, especially women, small farmers, and micro-entrepreneurs in rural and semi- urban areas.

With a robust CAGR of 28 per cent from FY14 to FY24, the sector now serves over 7.9 crore unique borrowers across 92 per cent of the country’s districts, demonstrating its deep and widespread outreach.

Looking ahead, the outlook for FY26 remains cautiously optimistic, the report added.

“The microfinance sector is at a pivotal point, balancing sustainable growth with responsible lending. The MFIN guardrails are a timely step to curb over-indebtedness and strengthen asset quality, though they may create short-term operational and financial strain, especially for smaller MFIs,” said Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services LLP.

While growth could slow temporarily due to rising competition as the sector recalibrates to the recent MFIN guardrails amid rising delinquency levels, the reforms are likely to enhance credit discipline, portfolio quality, and long-term sector resilience.

However, the key challenge will be ensuring that such structural reforms do not dilute the broader goal of financial inclusion. As of March 2024, about 37 per cent of India’s rural population is covered by the MFI industry.

“A balanced approach, combining policy support, innovative credit assessment, and strategic partnerships, will be essential to sustain outreach while reinforcing the sector’s foundation,” said Patil.

In addition to this, the emergence of fintechs and non-NBFC-MFIs offering a wide array of credit options made access to funds easier, further contributing to multiple lending.

—IANS

Reader Comments

P
Priya K.
This is such encouraging news! Microfinance has been a game-changer for women entrepreneurs in my village. The 12-15% growth projection shows the sector's strength 💪 Hope the monsoon cooperates to make it even better!
R
Rahul S.
While the growth numbers look good, I'm concerned about over-indebtedness in rural areas. The article mentions MFIN guardrails - hope they're implemented properly to prevent another crisis like Andhra Pradesh faced years back.
A
Anjali M.
My SHG group got our first loan last year and it changed everything! We started a small tailoring business. More women need to know about these opportunities. The 7.9 crore borrowers number is impressive but we can do even better!
S
Sanjay P.
The 28% CAGR since 2014 is remarkable. Shows how microfinance has become mainstream. But with fintechs entering the space, traditional MFIs need to up their tech game to stay relevant.
M
Meena R.
As someone who works with rural communities, I've seen both sides - microfinance can empower but also burden if not managed well. Glad they're focusing on responsible lending now. The 37% coverage means there's still so much work to do!
V
Vikram J.
Interesting analysis. The monsoon factor is crucial - bad weather can derail rural repayments quickly. MFIs should develop better risk models for climate variability. Overall cautiously optimistic as the report says.

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Tags:
Microfinance India Financial Inclusion Rural Credit MPFASL Mahendra Patil RBI Fintech Lending
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