Blitz Bureau
NEW DELHI: India’s microfinance sector is projected to clock a 15 per cent CAGR in the gross loan portfolio (GLP), surpassing Rs 10 trillion (Rs 10 lakh crore) loan portfolio over the next five-six years, a report said on July 21. The report by Avendus Capital highlights a resilient reset underway in India’s most critical engines of financial inclusion.
Despite weathering multiple downcycles, the microfinance sector has remained resilient and is now entering a structural upcycle. “The sector is expected to return to historical cross-cyclical RoEs, ranging from 15-20 per cent over the next five to six years. This shift is driven by improved credit discipline, operational reengineering by industry frontrunners and stronger regulatory oversight,” the report mentioned.
Diverse geographic potential and deeper rural market penetration are opening new frontiers for financial inclusion, while the rising engagement with new-to-credit (NTC) customers is broadening the industry’s borrower base. Accelerated adoption of AI-powered technologies is further enhancing operational efficiency and enabling smarter, data-driven lending decisions.
“The microfinance industry has shown strong resilience in recent years, with downturns getting shorter. This progress is a direct result of deliberate regulatory actions such as MFIN guardrails and the CGFMU scheme, aimed at curbing borrower overleveraging and improving asset quality,” explained Anshul Agarwal, Managing Director and Head, Financial Institutions Group Investment Banking, Avendus Capital.
Green shoots are already visible on the ground signaling stronger borrower discipline and improved fundamentals going forward. Together, these developments are building the base for renewed investor confidence and durable sector health, Agarwal noted.
