Daijiworld Media Network- New Delhi
New Delhi, Apr 10: In a positive sign for the financial ecosystem, India’s microfinance sector is showing strong signs of revival with loan growth picking up sharply in the fourth quarter of FY25, a new report has revealed.
According to a study by a leading financial research firm, the sector witnessed a surge in credit disbursal and repayment activity, indicating renewed borrower confidence and operational resilience among microfinance institutions (MFIs).
Experts noted that loan growth momentum had been gradually recovering over the past few quarters, but Q4FY25 marked a significant uptick, driven by improved rural incomes, better collection efficiency, and stronger borrower sentiment. “The sector has bounced back from pandemic-related disruptions and is now on a path of sustained recovery,” the report noted.
The growth was particularly led by non-banking financial companies-microfinance institutions (NBFC-MFIs) and small finance banks, which contributed the lion’s share of new loan originations.
Industry insiders attribute the rebound to stabilised inflation, increased digital outreach, and government schemes that have improved liquidity among lower-income households. Many institutions also reported a decline in delinquency rates, reinforcing the belief that borrower discipline has returned.
The microfinance sector plays a vital role in empowering women entrepreneurs, small traders, and rural households, and its recovery is expected to contribute significantly to India’s broader financial inclusion goals.
Analysts predict that if the current growth trajectory sustains, the microfinance industry could see double-digit expansion in FY26, creating ripple effects across allied sectors.
The coming quarters will be crucial in determining whether the recovery solidifies or faces headwinds due to macroeconomic challenges. However, the current sentiment remains cautiously optimistic, with financial institutions preparing for increased demand and expanding their outreach to underserved regions.