India Microfinance Market to Grow with a CAGR of 10.20% through 2031F
The India Microfinance Market is growing due to rising financial inclusion, strong rural demand,
government support, expanding digital infrastructure, and increased credit
access for low-income and underserved populations.
According
to TechSci Research report, “India Microfinance Market – By Region, Competition Forecast & Opportunities, 2021-2031F”, the India Microfinance Market was valued at USD
7.72 Billion in 2025 and is expected to reach USD 13.78 Billion by 2031 with a
CAGR of 10.20% during the forecast period. The India Microfinance Market has witnessed remarkable
growth over the past decade, emerging as a crucial financial ecosystem that
supports millions of underserved individuals and small entrepreneurs. Initially
conceived as a means to provide small loans to low-income groups, microfinance
has evolved into a comprehensive set of financial services including credit,
savings, insurance, and remittance solutions. This market plays a vital role in
driving financial inclusion, bridging gaps where traditional banking services
often fall short, especially in rural and semi-urban regions. With India’s
massive population and significant proportion living below or near the poverty
line, microfinance institutions (MFIs) have become instrumental in uplifting
socio-economic standards by providing accessible, affordable, and timely
financial products.
The growth of the microfinance sector in
India is underpinned by several macroeconomic and social factors. Rapid
urbanization and rising income levels have created a broader base of
financially aware consumers seeking formal credit options. Moreover, government
initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the push for
digital financial literacy have helped integrate marginalized populations into
the formal banking system. The Reserve Bank of India’s regulatory oversight
since 2011 has contributed to a more structured and transparent microfinance
sector, bolstering investor confidence and encouraging the entry of new
players. This regulatory clarity has also led to an expansion of the gross loan
portfolio from ₹17,000 crore in 2012 to over ₹3.93 lakh crore by 2024,
representing an extraordinary compound growth rate.
The reach of microfinance in India is
vast and growing, with nearly 8 crore borrowers served across more than 700
districts, including aspirational districts that are key focus areas for
socio-economic development. This extensive coverage underscores the sector’s
critical role in providing credit access to small entrepreneurs, women, and
rural households who traditionally lack collateral and credit history required
by conventional banks. The microfinance market’s impact transcends financial
metrics; it also contributes about 2.03% to India’s Gross Value Added (GVA) and
supports over 1.3 crore jobs, demonstrating its significance as an economic
driver. Its ability to empower marginalized communities through financial
inclusion enhances social equity and supports grassroots entrepreneurship.
Technological advancements have been
pivotal in transforming the microfinance landscape in India. The adoption of
digital platforms, mobile banking, and fintech solutions has facilitated faster
loan disbursal, real-time credit assessments, and easier repayment processes.
Digital integration not only reduces operational costs for microfinance
institutions but also improves customer experience by offering transparency and
convenience. Innovative technologies such as AI-driven credit scoring and
blockchain for secure transactions are increasingly being explored, which could
further enhance efficiency and reduce risks. Moreover, the ongoing push for
digital payments and financial literacy is expected to deepen the penetration
of microfinance services, particularly in remote areas.
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"India Microfinance Market”
The India
Microfinance Market is segmented into provider type, purpose, tenure, and
region.
Based
on Provider Type, NBFCs is the fastest-growing market for India Microfinance
Market. NBFCs have gained significant traction due to their flexible lending
models, quicker loan disbursals, and innovative digital platforms that enhance
customer outreach, especially in underserved rural and semi-urban areas. Unlike
traditional banks, NBFCs are more agile in adapting to borrower needs, offering
customized products and faster credit decisions. Their ability to leverage
technology and partnerships with fintech firms has accelerated growth, making
NBFCs a preferred choice for microfinance services. This growth is supported by
favorable regulatory policies and increasing demand for affordable credit among
low-income groups.
Based
on region, South region of India is the fastest-growing market for India
Microfinance Market. This growth is driven by strong financial literacy, higher
banking penetration, and proactive government initiatives promoting financial inclusion
in states like Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana. The region
benefits from a robust network of microfinance institutions (MFIs) and NBFCs
actively expanding their reach to rural and semi-urban populations.
Additionally, increasing adoption of digital payment systems and mobile banking
has further accelerated microfinance accessibility. Economic development and
focused credit programs aimed at empowering women entrepreneurs also contribute
significantly to the region’s rapid microfinance market expansion.
Major companies
operating in India Microfinance Market are:
- Ujjivan Financial Services Limited
- Asmitha Microfin Ltd.
- Utkarsh Small Finance Bank Limited]
- CreditAccess Grameen Limited
- Share Microfin Limited
- Spandana Sphoorty Financial Ltd.
- Bhartiya Samruddhi Finance Limited (BSFL)
- Bharat Financial Inclusion Limited
- BSS Microfinance Limited
- Muthoot Microfin Limited
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“The India Microfinance Market is poised for
further expansion driven by continued economic growth, supportive policy
frameworks, and technological innovation. However, to sustain this growth, the
sector must address existing challenges through regulatory support, financial
education, and risk mitigation strategies. Emphasizing customer-centric
approaches and ethical lending will help build trust and loyalty among
borrowers. As microfinance continues to empower millions and contribute
significantly to India’s socio-economic fabric, its evolution will remain
integral to the country’s broader financial inclusion goals and poverty
alleviation efforts.” said Mr. Karan Chechi, Research Director of TechSci
Research, a research-based management consulting firm.
“India Microfinance
Market By Provider Type (Banks, NBFCs, Fintech), By Purpose (Agriculture, Household, Manufacturing/Production,
Trade & Services, Others), By Tenure (Less than 1 Year, 1-2 Years, More
than 2 Years), By Region, Competition Forecast & Opportunities, 2021-2031F”, has
evaluated the future growth potential of India Microfinance Market and provides
statistics & information on market size, structure and future market growth.
The report intends to provide cutting-edge market intelligence and help
decision makers take sound investment decisions. Besides, the report also
identifies and analyzes the emerging trends along with essential drivers,
challenges, and opportunities in the India Microfinance Market.
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