Executive Summary
Introduction
In FY 2024–25, the global economy remains
fragile, with growth hovering around 3.1–
3.2%, reflecting the impact of tight monetary
policies, geopolitical tensions, and persistent
supply chain disruptions. While inflation has
eased slightly, it continues to stay above target
in many economies. Advanced economies are
experiencing slower growth, while emerging
markets, particularly in Asia, are driving global
momentum. However, risks from climate events,
high debt levels, and geopolitical uncertainties
continue to cloud the outlook, making global
recovery uneven and vulnerable to shocks.
It has impacted the Indian economy, which
resulted to downfall in GDP from 7% to 6.5%.
The microfinance sector in the country
experienced a sharp decline of around 14%,
indicating significant sector-specific stress.
Among the various types of lenders, SFBs
reported the steepest y-o-y de-growth at 20%,
followed by NBFC-MFIs, which saw an 18%
contraction. This downturn contrasts sharply
with the relatively stable performance of the
sector from 2023 and 2024. The current phase
was a result of both internal and external
factors, which adversely impacted microfinance
operations. The most widely discussed issue
contributing to this stress is the overleveraging
of credit, driven by increased borrower
exposure and a higher number of lenders.
This led to a build-up of risk in the system,
with many borrowers taking on multiple loans
from various institutions, thereby straining
repayment capacity.
The total loan portfolio of the microfinance
sector was at `3.81 lakh crore, at the end of the
financial year (2024-25), as per CRIF Highmark
data. The active client base recorded 13% de-
growth and touched 1,399 lakhs for the JLG model. Whereas the SHG Bank linkage showed
a positive growth, with the overall outstanding
reaching `3.04 lakh crore for 84.94 lakh SHGs
credit-linked. There were around 143.30 lakh
SHGs with 17.1 crore households being savings-
linked under the SHG Bank linkage programme.
The repayment performance under the JLG
model recorded deterioration. The Micro
Lending Institutions (MLIs), which included
MFIs, NBFCs and BC companies, reported a 90
plus dpd, including overdues above 179 days at
4.83% as against 2.04% in the last year.
Sensing the trouble brewing in the microfinance
sector, the industry leaders and SROs came up
with remedial measures in the form of additional
guardrails, the first set being issued in July 2024
and the next set in April 2025. These restrictions
brought some controls in lending and made the
situation better. Of course, these guardrails,
along with the restrictions on lending put by
lenders to MFIs, were reasons for the negative
growth in the sector. The situation is expected
to improve in the current financial year.
Bharat Microfinance Report
Bharat Microfinance Report (BMR) is a sectoral
report for the microfinance sector in the
country, compiling the data/information from
various sources and putting it together in
one place. The data is captured from Credit
Information Company as well as directly
sourced from Micro Lending Institutions
(MLIs). The SHG Bank linkage-related data is
obtained from NABARD. The data from some
other institutions are also in the Report. The
data is then analyzed and presented in a form
that can be easily appreciated by the users. The
report includes geographical coverage, client
outreach, income, expenditure and profitability
of MLIs, their financial ratios, activities beyond
credit, etc.
Reporting of the information
The detailed analysis of the data in chapters
3 and 4 is based on the information directly
sourced from 203 Micro Lending Institutions
(MLIs), which represent more than 98% MLI
business in the country. The data is also sourced
from Credit Bureau, viz. CRIF Highmark for the
sector as a whole. This information includes
data of almost all micro-lenders, viz. MLIs, Banks
and SFBs involved in microfinance lending
in India. There is also detailed information on
SHG Bank linkage, Credit Plus activities of
the microfinance sector and the BC model of
financing covered in the Report.
Highlights of the Performance
Microfinance Sectoral Performance
(based on CIC data)
The performance of the sector as a whole
is obtained from the Credit Information
Bureau and has been presented in Chapter
2. The CICs collect the data regularly from all
regulated entities and compile their reports.
As per the CRIF Highmark, the combined loan
outstanding of the microfinance sector was
`3,81,225 Cr., outstanding against 1,399 lakh
loan accounts, as on 31 March 2025. The share
of different institutions in loan outstanding is as
follows: NBFC-MFIs: `1,48,419 Cr. (39%); Banks:
`1,24,431 Cr. (32%); SFBs: `59,817 Cr. (16%);
NBFCs: `45,042 Cr. (12%), and Others: `3,516
Cr. (1%). The share of loan accounts of various
institutions is as follows: NBFC-MFIs: 539 lakhs
(39%); Banks: 466 lakhs (33%); SFBs: 216 lakhs
(15%); NBFCs: 163 lakhs (12%), and Others: 15
lakhs (1%).
Performance of Micro Lending
institutions [as collected directly from
203 Micro Lending Institutions (MLIs)]
Growth and Outreach
As per the data obtained directly from MLIs,
they operate in 28 States, 5 Union Territories, and 685 districts in India. Whereas, the data
from CIC, viz. CRIF Highmark shows operations
in all 36 States/UTs and in 719 districts of the
country. Another CIC has reported operations
of microfinance in 750 districts. The variation
in the number of districts may be on account
of continuation of some old data of MFIs and
Banks, reported as microfinance, in the CICs,
operated in the past. The detailed analysis of
the MLI operation is based on the data collected
directly from the MLIs.
The detailed analysis of the data received from
203 Micro Lending Institutions (MLIs), which
covers 98% of the microfinance portfolio, indicate
that the total branch network of microfinance
institutions was at 37,380, with 3.29 lakh
employees engaged with them. Together, they
are servicing over 627 lakh active micro clients,
with a total loan outstanding of `2,38,198 Cr.,
including a managed portfolio of `72,930 Cr.
The managed portfolio is contributed mostly
by Business Correspondents, which worked
out to `53,287 crores. The loan outstanding
per borrower of the reported MLIs works out
to `38,005 per borrower. The utilization of loan
indicates that about 91% of loans were used for
income generation purposes.
The CIC data shows a total active client base
of 8.28 Cr. and a loan outstanding of `3,81,225
Cr., for the entire microfinance sector. This
includes data from Banks, SFBs, NBFCs, NBFC-
MFIs and Other lenders. The client base and
loan outstanding for the sector declined by
13% and 14% respectively. Again, considering
the CIC data, the top 5 States continued to
be Bihar, Tamil Nadu, Uttar Pradesh, West
Bengal and Karnataka. Although there was a
reduction in the portfolio, Bihar continues to
be the top state, accounting for nearly 15% of
the total portfolio. Similarly, the top 25 districts
accounted for 18% of the total portfolio. The top
7 districts had more than `3,000 Cr. portfolio,
with 4 districts from Bihar (East Champaran,
Muzaffarpur, Samastipur, and Madhubani) and
2 districts from West Bengal (Murshidabad and
North 24 Parganas).
From the self-reported data from 203 Micro
Lending Institutions (MLIs), which excludes
Banks and SFBs, showed a decline in loan
portfolio and client base at 9% and 10%
respectively. However, the de-growth rate of
pure MFIs (excluding NBFCs and Pvt. & Pub. Ltd.
Coms) was at 11% in the loan portfolio and 14%
in active clients. Similarly, the MLIs reported a
de-growth of 17% in loan disbursements. The
NBFCs and NBFC-MFIs together contributed
to 86% of the total client base and 84% of the
outstanding portfolio of the MLIs, as reported
by the data.
The MLIs with a portfolio size of more than
`2,000 Cr. accounted for 81% of the client base
and 85% of the loan portfolio. About 15 to 20
major MLIs, mostly NBFC-MFIs and a couple of
NBFCs, dominated the MLIs’ lending portfolio.
At the same time, other MFIs like Societies,
Trusts, MACS or Cooperatives, Section 8
companies continued their operations in a low
key by serving in niche areas. They contributed
approximately 12% of loan portfolio outstanding.
The Southern region continues to be topping in
loan portfolio and the client base served. While
the client base served by South and the second
highest region, i.e. East, shows a difference
of 2%, the difference in the portfolio in these
two regions was about 10% indicating a higher
loan ticket size or household level lending in
the southern region. The proportion of rural
clientele is 80% in FY 2024-25.
Operational and Financial Performance
The microfinance sector continued to be a
‘feet on street’ model with 3.29 lakh personnel
employed, as at the end of the last FY 2024-
25. Of this 64% of staff were in the field. The
share of women in the MLI staff was only 9%,
which recorded a reduction from the previous
year and continued to be at a lower level. The
average number of active borrowers per credit
officer (ABCO) has shown a decline and was at 299. The reduction in clients should help the
MLIs to extend better services and put less
pressure on the staff, although it adds to the
cost of operation.
The major expenses in MLIs were due to the
financial cost, which formed 36%. The next
major item of expenditure was on account of
personnel cost, at 22%. The other operational
expenses were due to administrative
expenses and other expenses at 7% and 36%,
respectively. The average rate of operating cost
of a microfinance institution was at 7.09%. It
varied between different types of institutions
and different sizes. The lowest was for the MLIs
with more than `2,000 Cr., which was at 6.62%.
The Effective Yield of the MLIs, reported the data,
showed a weakened position during the year at
19.18%. While the NBFC-MFIs was at 19.12%
average yield, the other institutions, like Society,
Trust, and MACS/Cooperative, were at 19.99%.
The highest yield was recorded by NBFCs
with 20.98%. The average financial margin for
different types of institutions ranged from 0.41
to 8.56%. The weighted average Margin in
FY2024-25 stood at 7.99%. The average OSS
(Operational Self Sufficiency) of the MLIs was
at 104%. There were 6 MLIs that reported a
negative operational self-sufficiency, which
stood below 100%, indicating that their income
was insufficient to cover their total expenses.
The weighted averages of the Return on Assets
(ROA) and Return on Equity (ROE) for the sector
stood at (-) 1.71% and 0.32%, respectively.
These ratios were lower in most of the cases,
some showing negative too.
The CAR (Capital Adequacy Ratio) for all types
of MLIs remained above the desirable level of
15% with NBFC-MFIs having an average CAR of
32.51%. The Leverage (Debt Equity ratio) of the
sector was at 2.3. The sector received funding
of `58,046 Cr. for its business activities, which
includes the sale and securitization of portfolio of `11,627 Cr. The fund flow from the lending
institutions recorded a substantial reduction
during the year. The total outstanding
borrowing of MLIs stood at `85,877 Cr., which
also recorded a significant decline. The loans
received from the banks and other financial
institutions was mostly for the larger entities,
with NBFC-MFIs accounting for nearly 96% of
the outstanding pie. The large category of MLIs
had 95% of the share of funds received.
Self-Help Groups and the BC model
The SHG Bank linkage gained momentum with
the government adopting it as part of their
poverty alleviation programme, by the name
Deendayal Antyodaya Yojana - National Rural
Livelihood Mission (DAY NRLM). The number
of SHGs with savings linkage increased to
143.30 lakh accounts, covering 17.10 crore
households, during the year. The total bank
savings mobilized from these SHGs and placed
with the banks was at `71,433 Cr at the end of
the year. The number SHGs credit-linked also
increased during the year, with a total of 84.94
lakh SHGs having a loan outstanding with banks,
amounting to `3,04,259 Cr. The average loan
disbursed per SHG for FY 2024-25 is reported
at `3,75,000. The aggregate NPA of SHG loans
has improved in FY 2024-25 to 1.74%.
Business Correspondent Model
The Business Correspondent model has helped
the financial inclusion programme to grow from
strength to strength in the country. Initially, only
a few select entities, including NGO-MFIs, were
allowed to take part in this programme. But
later it was extended to corporate entities too,
which helped the NBFCs and NBFC-MFIs to be
appointed as corporate BCs. The engagement
of NBFC-MFIs was a win-win for both the lender
and the BC agent. The smaller MLIs found it a
better route to expand their business without involving capital from their side. Today there
are 90 MLIs operating as BCs for 91 lending
institutions. In the meanwhile, the co-lending
is also slowly getting traction. With the recent
guidelines on co-lending, the model will further
obtain traction. Some of the MLIs have already
entered into a co-lending arrangement with
larger entities. But it is still limited at present.
The total portfolio built through the BC model
by MLIs works out to `53,287 Cr. as on 31 March
2025.
Beyond Credit Activities
Microfinance has its origin from the social
background. Initially, most of the MFIs were
promoted by social leaders as a means to help
the poor to access credit. Even today, many
Micro Lending Institutions (MLIs), particularly
NBFC-MFIs and non-NBFC MFIs, are actively
engaged in a wide range of developmental
activities aimed at benefiting the communities
they serve. Beyond credit delivery, many
MFIs offer business-related services such as
insurance coverage, pension schemes, and
savings products. In response to increasing
climate risks, some MLIs have introduced
parametric insurance products to protect
borrowers from losses due to erratic climate
events. Some of them are contributing to social
development initiatives in areas like health,
education, water and sanitation, community
development, and the promotion of climate-
resilient agriculture, both with CSR funding
and otherwise. They are also instrumental in
building financial and digital literacy among
rural populations. Support from institutions
such as the RBI through Depositor Education
and Awareness (DEA) workshops has played a
key role in strengthening financial awareness.
Sa-Dhan, as a microfinance sector body,
continues to actively support MLIs in some of
these developmental activities.
