Bharat Microfinance Report 2025

Inclusive Growth Through Resilient Microfinance

Microcredit Landscape in India

2.1 Industry Overview clickhere

2.1.1 Key Performance Highlights

2.2 Loan Accounts clickhere

2.3 Loan Outstanding Analysis clickhere

Geographic and Institutional Expansion of Microfinance in India

3.3 Client Outreach of MLIs clickhere

3.4 Loan Outstanding clickhere

3.5 Loan Disbursement of MLIs clickhere

3.6 Purpose of Loan clickhere

3.7 Conclusion clickhere

Distribution of NBFC-MFIs across region and size

Operational Eminence of Micro Lending Institutions

4.1 Productivity of Workforce clickhere

4.2 Asset Quality in MLIs

4.3 Income and Expenditure Analysis clickhere

4.4 Self-Sustainability and Profitability clickhere

4.5 Balance Sheet and Capital Structure clickhere

SHG Bank Linkage Programme (SHG-BLP) and its Role in Financial Inclusion in India

5.1 Overview of SHG-BLP

5.2 SHG-BLP Activity since Inception clickhere

5.3 SHG based Livelihood Interventions of NABARD clickhere

Beyond Microcredit - Evolving Role of Micro Lending Institutions (MLIs)

Climate Smart Agriculture: Readiness to Resilience

Emergency Healthcare Financing Solutions Through Micro Lending Institutions (MLIs)

Business Correspondent Model in Microlending

Geographical Spread

Select & View Tables

Chapter 7.5Business Correspondent Model in Microlending

The Business Correspondent (BC) model was introduced as part of the financial inclusion programme in the country, launched in 2005. The Deepak Mohanty Committee in 2015 gave a proper structure to the Business Correspondent model1 . Initially, the BC model was open to a limited number of agents, like individuals, SHGs, Societies, NGOs, etc. But soon it was extended to corporate entities to act as BCs. Thus, microfinance companies emerged as BC to several financial institutions, thereby expanding the reach of credit far and wide.

7.5 Portfolio under Co-Lending Model

Co-lending has emerged as a key model for expanding credit access, with banks partnering with NBFCs, MFIs, housing finance companies, and FinTechs. The uniqueness of this concept is that the resourceful institutions can partner with low-resource institutions but who better reach with the masses. Also, it allows both the institutions to have a financial commitment whereby the skin in the game is established. Also, the smaller partner can get to learn the lending in specific areas.

While banks provide low-cost capital, NBFCs contribute local reach and customer insights, making credit accessible to underserved segments. The model also helps banks meet Priority Sector Lending (PSL) goals, channelling funds into rural housing, MSMEs, and small enterprises to drive inclusive growth.

Summary of the new Co-Lending Directions by the Reserve Bank of India (released on 6th August 2025)⁸
Feature	What the new rule says	Why it matters / how it changes things
Applicability	The direction shall be applicable to Co-Lending Arrangements (CLAs) entered into by the following Res: Commercial Banks (excluding Small Finance Banks, Local Area Banks and Regional Rural Banks); All-India Financial Institutions; and, Non-Banking Financial Companies (including Housing Finance Companies).
Minimum retention/ "skin in the game"	Each RE (both lending partners) must retain at least 10% of every loan in their own books.	This ensures that both parties have actual risk exposure and cannot offload all risk to the other.
Scope expanded (all forms of loans)	Co-lending is no longer limited to priority sector loans; it can apply to all eligible lending types (secured or unsecured) between REs.	More flexibility: banks and NB-FCs can collaborate in broader lending segments beyond just priority sectors.
Blended interest rate/fees disclosure	The borrower must see a blended rate (weighted average of rates from both lenders, based on their funding share). Any additional fees must be included and disclosed (in KFS - Key Facts Statement).	Prevents hidden charges or one party charging higher rates secretly; promotes transparency for borrowers.
Default Loss Guarantee (DLG) is capped	The originating RE may provide a default loss guarantee (i.e., first-loss support) up to 5% of the outstanding loans.	Helps manage risk, but the cap prevents overuse of guarantees that could mask risk.
Books/record-keeping / transfer of exposures	Both REs must reflect their share of each loan in their books within 15 calendar days of disbursement. If the originator cannot make the transfer within 15 days, that loan stays on its books until it can be moved under “Transfer of Loan Exposure (TLE)” rules.	Ensures prompt recognition of exposures; avoids ambiguity about whose books the loan is on.
Asset classification / NPAs at borrower level	The classification of a loan as non-performing (or stressed) must be at the borrower level, not split by how much each RE has funded. So if the borrower defaults, both co-lenders’ exposure is classified similarly.	Removes regulatory arbitrage (one party cannot treat it as normal if the other marks it nonperforming).
Disclosures & Borrower’s information	The co-lending agreement and the loan agreement with the borrower must clearly disclose: roles of each RE (who does sourcing, servicing, etc.), which entity is their contact point, these terms beforehand. Also, details like a list of co-lending partners, interest rates, default guarantee, etc., must be disclosed periodically.	Promotes clarity for borrowers, avoids confusion about which lender does what.
No third-party/ selective “cherry picking” under co-lending	The earlier “CLM-2” style (discretionary choice by one party to pick certain loans) is disallowed. If one RE wants to buy an exposure after origination, that must follow TLE rules, not co-lending rules	Prevents misuse (e.g., one partner picking only good borrowers post fact) and ensures commitments are made upfront.
Governance, policy, operational controls	REs must embed CLA terms in their credit policies (limits on how much of their portfolio can be in CLAs, target borrower segments, due diligence on partner REs, grievance redressal). Must have business continuity planning, KYC compliance, customer service, information sharing arrangements, etc.	To ensure that co-lending isn’t just a legal contract, but wellgoverned in practice.

⁸https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12888&fn=2&Mode=0

The recent guidelines issued by RBI have brought a significant change in the concept of co-lending which augurs well for the sector. The new norm allows any regulated entities to get into a co-lending arrangement, and the share of their financial commitment can be mutually decided.

NBFCs themselves have become central to India’s credit landscape, now holding 46.2%⁸ share in personal and retail lending. Their rising reliance on bank borrowings (from 19.8% to 22.6%) reflects stronger collaboration with banks, improving liquidity for last-mile lending. With AI-driven risk tools reducing NPAs to 3.5% and digital lending platforms revolutionizing delivery, NBFCs are bridging financial gaps while ensuring efficiency, discipline, and scalability—cementing their role as critical engines of financial inclusion and credit growth.

There are 13 MLIs engaged in a Co-lending agreement with 13 banks/FIs. Although some of the MLIs are engaged with more than 1 bank/FI. Total portfolio under the co-lending model is ₹ 2,352 crores, which is 1% of the total portfolio of the MLIs.

Table 7.7: MLI-wise Co-lending portfolio (₹ in Cr)

S. No.	Name of MLIs	Name of Banks/NBFCs	Total Portfolio (in ₹ cr)	Out of the total portfolio, the share of Banks/NBFCs (₹ in Cr.)	Out of the total portfolio, the share of MLIs (₹ in Cr.)
1	Annapurna Finance Pvt. Ltd.	SIDBI	26.08	19.56	6.52
2	Avanti Finance Pvt. Ltd.	Federal Bank, Kisetsu Saison Finance India Pvt. Ltd., State Bank of India, Vivriti Asset Management Pvt. Ltd.	685.95	609.52	76.43
3	Dvara Kshetriya Gramin Financial Services Pvt. Ltd.	HCLS, MAS Financial Services Ltd.	20.44	16.35	4.09
4	Janakalyan Financial Services Pvt. Ltd.	Ananya Finance for Inclusive Growth Pvt. Ltd.	0.65	0.49	0.16
5	Muthoot Microfin Ltd.	Axis Bank Ltd., State Bank of India	185.11	138.6	46.51
6	Navachetana Microfin Services Pvt. Ltd.	State Bank of India	130.48	104.38	26.1
7	S V Creditline Pvt. Ltd. (SVCL)	IndusInd Bank	173.21	138.57	34.64
8	Satin Creditcare Network Ltd.	Karnataka Bank	0.68	N.A.	0
9	Save Microfinance Pvt. Ltd.	Federal Bank, State Bank of India	770.14	603.5	166.64
10	Sugmya Finance Pvt. Ltd.	Vivriti Asset Management Pvt. Ltd., MAS Financial Services Ltd.	15.99	12.79	3.2
11	Svasti Microfinance Pvt. Ltd.	MAS Financial Services Ltd.	20.08	16.06	4.02
12	Uttrayan Financial Services Pvt. Ltd.	State Bank of India	310.52	248.28	62.24
13	Vedika Credit Capital Ltd.	Indian Overseas Bank, Punjab National Bank, State Bank of India	12.59	10.07	2.52
	Total		2,351.92	1,918.17	433.75

Conclusion

The Business Correspondent (BC) model has proven to be a cornerstone of India’s financial inclusion journey, extending credit and services to underserved communities while adapting to technological and regulatory shifts. With innovations like digital platforms, co-lending, and AI-driven risk management, BCs and NBFCs are reshaping credit delivery and strengthening last-mile connectivity. Despite persistent challenges, collaborative efforts among banks, MLIs, regulators, and new players like LSPs are fostering resilience and scale. Going forward, a balanced approach that integrates technology, trust, and community engagement will be key to building a sustainable and inclusive financial ecosystem.

Box 7.1: Digital journey for a BC Company

New Opportunity Consultancy Private Ltd. (NOCPL) is a new-age Business Correspondent (BC) partner to multiple Banks and Non-Banking Financial Companies (NBFCs) across India, dedicated to promoting financial inclusion.

NOCPL has implemented digital solutions across nearly all aspects of its operations. This includes:

Digitized customer sourcing: Loan originations by employing digital methods for KYC verification, bank account verification, borrower credibility check, borrower credit assessment, performing Compulsory Group Training, etc. The company extensively leverages mobile and browser-based applications,
Digitized collections: Use of digital technologies to manage and process loan repayments. This involves leveraging platforms and tools to automate, streamline, and improve the efficiency of the collection process, moving away from traditional, often manual, methods.
Virtual supervision: Use of technology and digital tools to monitor, guide, and support individuals or processes, often in a remote or automated manner. It’s essentially the application of digital solutions to traditional supervision, offering increased efficiency, data-driven insights, and the ability to monitor remotely.

Digitized Audit Functions: Use of technology to conduct audits, replacing or enhancing traditional, paper-based methods. This approach leverages computer systems, software, and data analysis tools to examine, evaluate, and verify financial records, internal controls, and other relevant data within the organization.

Benefits of digital solutions

Accelerate loan originations
Faster turnaround times and improved customer experience.
It enhances efficiency and customer engagement.
Streamlining processes and boosting productivity on the ground.
Strengthen risk with the e-KYC platforms of its banking partners, significantly reducing the risk of KYC forgery or fraud.
The adoption of digital e-signature processes has enabled a seamless, paperless documentation journey.
Reduce cost.

Courtesy: New Opportunity Consultancy Pvt. Ltd. (NOCPL)

List of Abbreviations

#	Abbreviation	Full Form
1	AA	Account Aggregator
2	ABCO	Average Borrower per Credit Officer
3	ABS	Active Borrowers per staff
4	AI	Artificial Intelligence
5	API	Application Programming Interface
6	APY	Atal Pension Yojana
7	AS	Accounting Standards
8	ATS	Average Ticket Size
9	AUM	Assets Under Management
10	BC	Business Correspondent
11	BF	Business Facilitators
12	BSBDA	Basic Savings Bank Deposit Account
13	CA	Chartered Accountant
14	CAGR	Compounded Annual Growth Rate
15	CAR	Capital Adequacy Ratio
16	ChatGPT	Chat Generative Pre-trained Transformer
17	CICs	Credit Information Companies
18	CLA	Co-Lending Arrangement
19	CLM	Co-Lending Model
20	CMI	Credit Market Indicator
21	CRPs	Community Resource Persons
22	CSA	Climate Smart Agriculture
23	CSR	Corporate Social Responsibility
24	D/E	Debt/Equity
25	DAY NRLM	Deendayal Antyodaya Yojana-National Rural Livelihood Mission
26	DAY NULM	Deendayal Antyodaya Yojana-National Urban Livelihoods Mission
27	DAY-NRLM	National Rural Livelihood Mission
28	DUGJY	Deen Dayal Upadhyaya Gram Jyoti Yojana
29	DEA	Depositor Education and Awareness
30	DoP	Department of Post
31	DPD	Days Past Due
32	ECB	External Commercial Borrowings
33	ECL	Expected Credit Loss
34	EDP	Enterprise Development Programmes
35	EIP	European Investment Plan
36	eKYC	Electronic Know Your Customer
37	EMI	Equated Monthly Instalment
38	ESG	Environmental, Social, and Governance
39	EV	Electric Vehicle
40	FACE	Fintech Association for Consumer Empowerment
41	FIs	Financial Institutions
42	FPOs	Farmer Producer Organizations
43	FSI	Financial Services Industry
44	FSSAI	Food Safety and Standards Authority of India
45	FY	Financial Year
46	GCC	General Credit Card
47	GDP	Gross Domestic Product
48	GJ	Gigajoules
49	GPFI	Global Partnership for Financial Inclusion
50	GRIP	Graduated Rural Income Generation Project
51	GST	Goods and Services Tax
52	HR	Human Resource
53	ICT	Information and Communication Technology
54	ID	Identity Document
55	IMF	International Monetary Fund
56	IRDAI	Insurance Regulatory and Development Authority of India
57	IVR	Interactive Voice Response
58	JEE	Joint Entrance Examination
59	JLG	Joint Liability Group
60	JLGPls	Joint Liability Groups Promoting Institutions
61	KCC	Kisan Credit Card
62	KFS	Key Facts Statement
63	KYC	Know Your Customer
64	LEDP	Livelihood and Enterprise Development Programme
65	LSPs	Loan Service Providers
66	MACS	Mutually Aided Cooperative Societies
67	MEDP	Micro Enterprise Development Programme
68	MGNREGA	Mahatma Gandhi National Rural Employment Guarantee Act
69	MLIs	Micro Lending Institutions
70	MMU	Mobile Medical Unit
71	MoRD	Ministry of Rural Development
72	MoSPI	Ministry of Statistics and Programme Implementation
73	MoU	Memorandum of Understanding
74	MSME	Micro, Small, and Medium Enterprises
75	MUDRA	Micro Units Development & Refinance Agency Ltd.
76	NABARD	National Bank for Agriculture and Rural Development
77	NBFCs	Non-Banking Financial Companies
78	NCD	Non-Convertible Debentures
79	NCDs	Non-Communicable Diseases
80	NDA	National Defence Academy
81	NEET	National Eligibility cum Entrance Test
82	NFHS	National Family Health Survey
83	NFP	Not-for-Profit
84	NGO	Non-Governmental Organizations
85	NOF	Net Owned Fund
86	NPA	Non-Performing Asset
87	NPS	National Pension System
88	NRHM	National Rural Health Mission
89	NRLM	National Rural Livelihood Mission
90	NSSO	National Sample Survey Office
91	OCEN	Open Credit Enablement Network
92	OD	Overdraft
93	OED	—
94	OECD	Organisation for Economic Co-operation and Development
94	ONDC	Open Network for Digital Commerce
95	OPEC	Organization of the Petroleum Exporting Countries
96	OSS	Operational Self Sufficiency
97	PACS	Primary Agricultural Cooperative Societies
98	PAN	Permanent Account Number
99	PAR	Portfolio at Risk
100	PFRDA	Pension Fund Regulatory and Development Authority
101	PIB	Press Information Bureau
102	PLFS	Periodic Labour Force Survey
103	PMFBY	Pradhan Mantri Fasal Bima Yojana
104	PMJAY	Pradhan Mantri Jan Arogya Yojana
105	PMJDY	Pradhan Mantri Jan Dhan Yojana
106	PMJJBY	Pradhan Mantri Jeevan Jyoti Bima Yojana
107	PMMY	Pradhan Mantri Mudra Yojana
108	PMSBY	Pradhan Mantri Suraksha Bima Yojana
109	POs	Producer Organizations
110	PSBs	Public Sector Banks
111	QoQ	Quarter on Quarter
112	QR	Quick Response
113	RBI	Reserve Bank of India
114	RCBs	Rural Cooperative Banks
115	RE	Regulated Entity
116	ROA	Return on Assets
117	ROE	Return on Equity
118	RRBs	Regional Rural Banks
119	SC/ST	Scheduled Castes/Scheduled Tribes
120	SDGs	Sustainable Development Goals
121	SFB	Small Finance Bank
122	SGSY	Swarnajayanti Gram Swarozgar Yojana
123	SHG	Self-Help Group
124	SHG-BLP	Self-Help Group Bank Linkage Programme
125	SHPIs	Self Help Group Promoting Institutions
126	SIDBI	Small Industries Development Bank of India
127	SME	Small and Medium-sized Enterprises
128	SRLM	State Rural Livelihoods Mission
129	SROs	Self-Regulatory Organizations
130	TLE	Transfer of Loan Exposures
131	UI	User Interface
132	ULI	Unified Lending Interface
133	UPI	Unified Payments Interface
134	US	United States
135	UTs	Union Territories
136	WASH	Water, Sanitation, and Hygiene
137	WEAF	Women Enterprise Acceleration Fund
138	WE-LEAD	Women Entrepreneurship Livelihood Enhancement and Development
139	YEP	Youth Entrepreneurship Program
140	YoY	Year on Year

Glossary

ABCO

ABCO is an acronym for Active Borrower per Credit Officer. It is a key operational metric in microfinance that measures the client-to- credit officer ratio, indicating the average number of active borrowers managed by each credit officer. It is also commonly referred to as the Case Load. This will also indicate the efficiency of operation, which can impact the operational expenses

Active Borrowers

The individuals whose loan accounts are current have an outstanding loan balance with the MFI, and are under repayment obligation. Individuals who have multiple loans with an MFI should be counted as a single borrower.

Assets Under Management (AUM)

Assets Under Management (AUM) refers to the total value of client loan portfolios that an institution actively manages, including both on- book and off-balance sheet (off-BS) portfolios. This includes all outstanding principal from current, delinquent, and renegotiated loans, but excludes loans that have been written off, on the own book, as well as those securitized or direct assignment assets resting on the securitization partners. AUM reflects the overall scale of financial assets the institution is responsible for, regardless of ownership.

Average Loan Size

Average Loan size represents the client-per- capita loan amount. It is calculated as the Loan portfolio divided by the number of clients of an MFI. It is a key indicator used to assess the scale and depth of credit outreach.

Average Ticket Size (ATS)

Average Ticket Size (ATS) refers to the average loan amount disbursed per loan during a specific period of time. This metric is typically calculated for a defined time period such as monthly, quarterly, or annually, depending on the reporting or analysis needs. It is calculated as the Total Loan Amount Disbursed divided by the Total Number of Loans Disbursed.

Borrowing Cost

The cost of borrowing refers to the total charge incurred for taking a debt obligation, which includes interest payments as well as any additional financial fees (such as processing fees, service charges, insurance premiums, or administrative costs). A percentage of such cost over the total amount borrowed indicates the rate of such cost.

Capital Adequacy Ratio

Capital Adequacy is a key financial indicator used to measure the solvency and risk-bearing capacity of Microfinance Institutions (MFIs). It reflects the institution’s ability to absorb potential losses and protect depositors and creditors. It is the proportion of the equity capital and free reserves or own funds held by an MFI against its total risk-weighted assets. A higher Capital Adequacy Ratio indicates stronger financial health and a greater ability to withstand credit or operational shocks. A minimum requirement of an NBFC-MFI is 15%.

Capital to Total Assets

The Capital to Total Assets ratio is a measure of an institution’s financial strength and stability. It indicates the proportion of an institution’s own capital (or net worth) relative to its total assets.

Co-lending

Co-lending is a financial arrangement in which two or more regulated entities join hands to extend a loan, by taking a fixed share by each entity. It will reflect on the books of all the partnering institutions. Typically, a bank and a non-bank financial institution (NBFC or NBFC-MFI) or HFC can join together to extend credit to a borrower and a prefixed ratio at a weighted average interest rate. The partnership combines the strengths of both entities.

Debt-Equity Ratio

The Debt-Equity Ratio is a key financial metric that indicates the proportion of total debt to total equity held by an institution at a given point in time. It reflects the degree to which an organization is financing its operations through borrowed funds versus own funds or free capital. It also indicates the leverage of capital of an entity

Debt Funding

Debt Funding refers to the portion of a financial institution’s loan portfolio that is financed through external borrowings, rather than from internal accruals or equity capital. It reflects the extent to which an institution relies on borrowed funds, such as loans from banks, financial institutions, or capital markets, to support its lending activities.

External Cost

External Cost refers to the finance cost incurred by Microfinance Institutions (MFIs) on the borrowed funds from external sources, primarily banks and financial institutions. This cost is largely determined by the prevailing lending rates of banks, and as such, it is beyond the direct control of MFIs.

Finance Cost

Finance Cost refers to the actual interest and other financial expenses incurred by a Microfinance Institution (MFI) on the average borrowed funds that remain outstanding during a given period. This metric is crucial for evaluating the cost-efficiency and funding strategy of MFIs, and plays a key role in determining their lending rates and financial sustainability.

Financial Inclusion

Financial Inclusion refers to the delivery of affordable, accessible, and appropriate financial services to disadvantaged and low-income segments of society who are traditionally excluded from the formal financial system. These services include savings, credit, insurance, remittances, pensions, banking services, etc.

Joint Liability Groups

Groups of 4 to 8 borrowers come together to borrow from a financial institution under a joint liability concept, as per which there is an inter se agreement between the members whereby each borrower is liable to repay the loan of each member of the group.

Margin

Margin refers to the difference between the total yield on the loan portfolio and the finance cost incurred to fund that portfolio. It represents the net earnings a Microfinance Institution (MFI) makes from its lending activities before operating expenses and provisions.

Managed Loan Portfolio

Managed Loan Portfolio refers to the loan assets originally originated by Microfinance Institutions (MFIs) but subsequently sold or assigned to a third party, such as a bank, to improve liquidity. Despite the sale, MFIs continue to manage these loans, including activities like collection of repayments and servicing the accounts on behalf of the purchasing institution. This arrangement helps MFIs free up capital while maintaining their relationship with borrowers and ensuring ongoing portfolio management.

Non-Performing Assets (NPA)

A Non-Performing Asset (NPA) is a debt obligation where the borrower has failed to honour repayment commitments, either interest, principal, or both, to the designated lender for a specified period, typically 90 days or more. As a result, the NPA ceases to generate income for the lender in the form of interest or principal repayments. NPAs represent credit risk and affect the financial health and asset quality of lending institutions.

On-book Portfolio (Net Loan Portfolio)

On-book Portfolio (Net Loan Portfolio) refers to the total outstanding principal of all active client loans recorded on the institution’s balance sheet. This includes current, delinquent, and renegotiated loans, but excludes loans that have been written off. Interest receivable is not included, except for Microfinance Institutions (MFIs) that report under Ind-AS, where such interest is recognized as part of the outstanding amount.

Operating Self Sufficiency (OSS)

Operating Self Sufficiency (OSS) measures the extent to which a Microfinance Institution’s (MFI’s) income from operations and investments is sufficient to cover its operating expenses, like operating costs, loan loss provisions, and finance costs (cost of borrowed funds) incurred for conducting the operations. An OSS ratio of 100% or above indicates that the MFI is generating enough income to sustain its operations without requiring subsidies or external support, reflecting financial viability and sustainability.

Outstanding Borrowings

Outstanding Borrowings refer to the total amount of funds that an entity has borrowed and has not yet repaid as of a specific reporting date. This includes all short-term and long- term debt obligations, such as loans, credit lines, bonds, and other forms of financing, net of any repayments made.

Portfolio Quality

Portfolio Quality refers to the level of credit risk present in a loan portfolio, indicating the likelihood of default by borrowers. A high- quality portfolio contains a lower amount of risk, characterized by timely repayments and minimal defaults. Maintaining good portfolio quality is crucial for the financial health and sustainability of lending institutions.

Portfolio at Risk (PAR)

Portfolio at Risk (PAR) indicates the proportion of outstanding amounts of all loan accounts having past due/arrears to the total outstanding loan. In general, PAR 30 refers to the percentage of the loan portfolio that remains unpaid 30 days or more beyond the due date, which would be used as a measure to assess the portfolio quality. Loans with dues overdue by 90 days or more (PAR 90) are generally classified as Non-Performing Assets (NPAs).

Qualifying Assets

Qualifying Assets are loan portfolios created by MFIs adhering to certain conditions as prescribed by RBI, to make the MFIs eligible to be called as MFIs and to raise loans from banks under the Priority Sector Advances Scheme (as per recent RBI norms). For an MFI, 60% of the total ass ets need to be under this category

Return on Assets (RoA)

Return on Assets (RoA) is the universally accepted profitability measure, which, in essence, is the percentage net income earned out of total average assets deployed by MFIs during a given period, typically one financial year. It is a widely used profitability metric that measures how efficiently an institution utilizes its total assets to generate net income.

Return on Equity (RoE)

Return on Equity (RoE) is a key profitability indicator that measures the net income earned by a Microfinance Institution (MFI) relative to its average equity during a given period, typically one financial year. RoE reflects how efficiently an MFI is using its own capital (equity) to generate profits.

Self Help Groups (SHGs)

SHGs refer to groups of 10-20 persons coming together to form an informal community-based institution to meet their common financial and social needs. Most of the SHGs are formed by women from a homogeneous background. SHGs collect regular savings from members and use them for internal lending, before accessing higher amounts from banks.

SHG Bank Linkage Programme (SBLP)

SHGs are linked to mainstream banks for keeping their surplus savings and also to obtain loans. The loan is often given as a multiplier of the total internal savings accrued in a group. It is considered to be an effective strategy to ensure financial inclusion for the unbanked poor people.

Surplus

Surplus refers to the excess of income over expenses. It is calculated as the difference between the yield (i.e., income earned from the loan portfolio) and the total cost (including finance cost, operating expenses, and provisions). It can also be referred to as net margin.

Yield on Portfolio

Yield represents total income from microcredit operation - interest income, processing fee/ service charge – earned out of the average loan portfolio outstanding for a specific period. It does not include investment income. It is a good proxy/surrogate for loan interest rates. It serves as a useful proxy for the effective loan interest rate charged to clients and is often used to assess the pricing structure and earning capacity of the loan portfolio.