Facts for Prelims (FFP)
Source: TOI
Context: The Microfinance Industry Network (MFIN) launched the third edition of “Micro Matters: Macro View – India Microfinance Review FY 2022-23” in Mumbai.
Key findings of the review:
- The microfinance sector added 87 lakh new women clients, reaching approx. 6 crore low-income women clients with outstanding credit of over 3 lakh crores across 729 districts.
- MFIs followed by banks are the largest provider of micro-credit amongst other regulated entities.
- MFIs’ gross Non-Performing Assets (NPA) decreased from approx. 5.6% (FY22) to 2.7% (FY23).
About MFIs in India:
| About Microfinance in India | |
| Status | Microfinance contributes about 130 lakh jobs and 2% of the Gross Value Added (GVA), according to a National Council of Applied Economic Research (NCAER) study. |
| Definition | RBI defines microfinance as collateral-free loans to households with annual income up to Rs.3 lakh. |
| Contributions of MFI | Boosting Entrepreneurship: MFIs provide small loans, fostering entrepreneurship and small business development for economic growth and job creation. |
| Financial Inclusion: MFIs enhance financial inclusion, providing credit and financial services to those excluded from traditional banking, enabling savings, education, healthcare investment, and entrepreneurship. | |
| Poverty Reduction: Microfinance aids poverty reduction by offering small loans to the poor for income-generating activities, improving their standard of living. | |
| Empowering Women: Microfinance plays a crucial role in empowering women by providing financial resources, fostering economic independence, and improving social standing. | |
| Supporting Rural Development: MFIs support rural development by providing small loans to farmers and entrepreneurs, enhancing agricultural productivity and contributing to economic development in rural areas. | |
| Challenges with Microfinance in India | Over-indebtedness, high-interest rates, Lack of Financial Literacy, Operating in remote areas with inadequate infrastructure, Political Interference, and Lack of Regulation |
| Government Initiatives | SHG-Bank Linkage Program; E-shakti Programme (to digitize the accounts of various SHGs); PM SVANidhi (micro-credit loan to street vendors) |
| Way Forward | Strengthening Regulatory Framework, Promoting Financial Literacy, Promoting Partnerships, Ensuring Social Impact |
About MFIN (est. 2009)
It is an Association of Non-Bank Finance Company Micro Finance Institutions (NBFC-MFIs). It is an umbrella body of Micro Finance Institutions (MFIs) in India.
