Microfinance in India Growing Fast Again: Should We Be Concerned?

Again the talk has been raised in India regarding the fast-growing microfinance sector. It is a strong indication of the 2010 crisis, where multiple lending firms caused overleveraging the users. According to the recent reports by the inclusive finance India report, all these set of challenges will be addressed in a better way shortly.

A significant part of the debt is concentrated on a few client segments

A decent study on these reports shown that the best microfinance in India’s growth is vigorous and creating more stress on credit associates. Loan providing firms are grown by 84%, and the loan disbursal sector witnessed a 45% growth. The below stats proves the above statements.

• A 22 % increase in business branches
• The staff strength is increased by 38%
• Clints are increased by 44%
• The number of loans is increased by 45%

These numbers are revealing the fast growth of the microfinance sector in India. It has witnessed the rise in branches, staff, loans, and clients also.

How to deal with these challenges?

Compared to the 2010 conditions, now we have the best customer protection policies, restrictions on lone sizes, repayment procedure, lending terms and using credit reports for upcoming loans. Because of the high targets of MFI’s (Microfinance Industry), they are pushing the growth in multiple dimensions. Govt has taken many measures regarding this direction to avoid the replica of the 2010 crisis. It is good that we have better protection now.

Overgrowth of MFI’s risks:-

Stress in MFI’s due to random growth

The problems in a single MFI can be solved quickly. But it is hard to differentiate the same kind of products from various MFI’s. So there is always a concern that it may affect the whole MFI system.

Isolated geography is a worry.

In 2006, some isolated issues in Kolar and Nizamabad created much stress. But they were turned down in some time. But any such kind of environmental stress can ring dangerous signs.

Stress in a geographical area may be a struggle.

Uttar Pradesh is experiencing vigorous growth; it is facing the elections soon. This type of random growth may cause severe consequences.

Yes, it is a Worry but not a Panic Situation.

Yes, there are many worries, but there is no need to panic. Bangalore is one of the largest districts which is witnessing $400 debt. Still, it is a large city, and there is always a possibility to lend to more people.

Microfinance, despite all stress, including banking and many droughts in the country, there are many positives are there. It has witnessed high valuations and two dream IPO’s and eight new small finance banks.

Being the largest microfinance company in India, we provide many microfinance services and in a secure way. With our extensive range network and partners, we are aiming to offer flawless financial services to you.

Shobhit Pandey is a reader and a Professional Blogger that contributes to the reader's community to enrich their knowledge by his qualitative posts. He likes to write on several niches and know exactly what readers want from the article