Press Release

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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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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