India Microfinance Market Size Worth US$ Million, Globally, By 2028 At CAGR of 11.3%

India Microfinance Market Set to Expand with a Projected CAGR of 11.3% during Forecast Period

The India microfinance market is witnessing robust growth as it serves the unbanked population, promoting self-sufficiency and improved risk management. Initiatives to enhance consumer awareness and focus on microinsurance are also contributing to its success.

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According to a recent study by strategic consulting and market research firm Report Ocean, the India microfinance market is expected to grow at a CAGR of 11.3% until 2028. The market is thriving due to the increasing number of microenterprises, government support for microfinance, and reduced interest rates. The microfinance sector is predicted to experience rapid growth in the coming years. Microenterprises play a crucial role in driving economic development, positively impacting market growth. Additionally, the growth of small and medium enterprises (SMEs) and lower-income groups, particularly women in rural areas, their ability to manage household and social livelihoods, along with government initiatives to foster fair competition and improve the national payment system, are key drivers supporting market expansion. However, the market's growth is constrained by microfinance institutions' shorter repayment terms and high interest rates.

Adoption of Cutting-Edge Technology in the Microfinance Industry

The microfinance industry's increasing utilization of digital technology offers additional channels for customers, boosting revenue potential. Improved connectivity in underdeveloped areas and technological advancements create lucrative opportunities for market expansion. The microfinance sector in emerging markets, including India, has a high penetration of modern technologies such as point-of-sale (POS) systems, ATMs, and mobile banking, among others. For instance, the Indian government has introduced several financial assistance programs for current and future micro, small, and medium enterprises (MSMEs) to provide them with the necessary financial support for establishment and growth.

Shift from Traditional Lending to Microfinance

With the widespread adoption of smartphones and internet access across the country, online finance has witnessed significant growth in recent years. Microfinance has emerged as a practical and widely-used solution for lenders, offering quick and accessible loan applications. Many individuals and businesses now prefer online loan applications over traditional lending processes. The microfinance sector has swiftly transitioned to a more efficient digital model, covering a larger population at a lower cost. The ease of loan application for borrowers and benefits for lenders, such as automated loan administration and quick approval, drive market expansion.

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Challenge: High Interest Rates on Small Amounts

The primary barrier to market expansion is the high interest rates charged by microfinance organizations and microlenders for loans of varying sizes. The focus on revenue generation leads to short repayment periods and high fees. Microfinance institutions face the challenge of charging high interest rates and enforcing shorter repayment terms due to significant borrowings from banks and other institutions, which restricts market growth. Additionally, strict government regulations and the reliance on private equity for capital further hinder the expansion of the microfinance sector.

BY TYPE (BANK, NON-BANK), BY BANK TYPE (SMALL FINANCE COMPANIES, COMMERCIAL BANKS, REGIONAL RURAL BANKS, AND COOPERATIVE BANKS),

BY NON-BANK TYPE (NBFC-MFIS, NBFCS, NOT FOR PROFIT MFIS), BY AREA (URBAN, RURAL),

BY END-USE (AGRICULTURAL AND ALLIED SERVICES, SERVICES, TRADE & BUSINESS, EDUCATION, PRODUCTION, AND OTHERS)

Segmental Coverage

India Microfinance Market - By End-User

The India microfinance market is segmented based on end-users, including agricultural and allied services, services, trade and business, education, production, and others. The agricultural and allied services segment holds the largest market share. Microfinance organizations play a crucial role in bridging the gap by providing farmers with access to professional advice and low-interest loans, enabling them to break free from poverty. As individuals' financial conditions improve, trust in the government grows. Trade and business are also expected to dominate the market share. Microfinance facilitates secure small business loans, adhering to ethical lending principles. These loans primarily support microenterprise owners in underdeveloped nations. Examples of microenterprises include basket production, stitching, street vending, and poultry farming.

Impact of COVID-19 on India Microfinance Market

Since the COVID-19 pandemic has made lending operations, such as past-due or non-collectible loans, an implicit component of the financial sector, the epidemic has had a moderate impact on the microfinance industry. Additionally, because of a statewide surge in patients, the government has closed some microfinance organizations. Additionally, the government offered several additional digital channels for microfinance firms to promote their goods and attract clients, which had a positive effect on the market's expansion. As a result, during the current health crisis, this has emerged as one of the main drivers of expansion for the microfinance industry. Institutions obstruct the growth of industries.

Table of Content:
1. Research Framework
1.1. Research Objective
1.2. Product Overview
1.3. Market Segmentation
2. Research Methodology
2.1. Qualitative Research
2.1.1. Primary & Secondary Research
2.2. Quantitative Research
2.3. Market Breakdown & Data Triangulation
2.3.1. Secondary Research
2.3.2. Primary Research
2.4. Breakdown of Primary Research Respondents, By Region
2.5. Assumption & Limitation
3. Executive Summary

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This release was published on openPR.