India Micro-lending Market is projected to witness a massive jump in the forecasted period of 2023-2028 as the demand for micro-loans is rising at rapid growth. Major growth drivers of this industry are the unbanked population, the increasing population of microenterprises, government support for microfinance, and digital technology & mobile penetration.
- Indian Micro-lending Market get highly impacted by the pandemic as it increased the fraud cases in the industry by 69%. However, despite these challenges Indian micro-lending market fulfilled the financial needs of 60 million customers.
- In 2022 Micro-lending market of India is a primary provider of small loans to micro-enterprises consisting of 35% of the market.
- Despite a heavy banking presence in the country, around 190 Mn Indians don’t have bank accounts this is an untapped market area for players.
According to Ken Research: The Indian Micro lending market is growing rapidly and is expected to dominate the global micro-lending market by emerging as the most significant market by the end of 2028. As per the RBI (Reserve Bank of India), only 5% Of Indians have access to micro-finance loans. However, almost 50% of the country’s population is eligible and qualified for microloans. Further, the market is set to witness huge investments as the government aims to strengthen this market.
1. Impact of the Pandemic on the Indian Lending Market
The COVID-19 pandemic has had a slight effect on the microfinance sector given that it has made lending operations, like past-due or non-collectable loans, an implicit part of the financial system.
Despite the pandemic, the Indian micro-lending market fulfilled the financial needs of 60 million customers from 28 Indian states spread across 620 districts. The industry reported 90% collection efficiency during the pandemic and a growth of 20% in customer acquisition.
The industry was also get impacted by the surge in fraud cases during the pandemic, around 69% of micro-lending companies encountered fraud resulting in a loss of $1 Mn.
2. Current Scenario of the Indian Micro Lending Market
The Indian micro-lending is the major contributor to the world lending market and is expected to grow at a CAGR of 11 % by 2028.
In 2022, the Indian micro-finance market witnesses a growth of 20% compared to the previous year.
The number of loan accounts in the Indian micro-lending market stood at 130 Mn in 2022 which is 10% higher than 2021.
In the same year, the Indian Micro-lending market provided loans to ~6 crore unique borrowers, through 12 crore loan accounts.
3. Growth drivers of the Indian Micro Lending Market
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In India, 190 Mn populace lacks access to traditional banking services. Micro-lending institutions step in to fill this gap by offering small credits and monetary services to people who wouldn’t otherwise have access to credit.
Particularly, the increase in microenterprises and small firms in India has boosted the need for micro-lending services. These businesses usually need working money to maintain daily operations. Around 35% of microenterprises took small loans from Micro-lending institutions.
The Indian government’s active support for microfinance initiatives, like Jan Dhan Yojana and different self-help group (SHG) programs, has played a vital part in cultivating the development of the micro-lending industry.
4. Major Players of the Indian Micro Lending Market
Equitas Small Finance, ESAF Microfinance and Investments Ltd, Fusion Microfinance Pvt Ltd, Annapurna Microfinance Pvt Ltd, Arohan Financial Service Ltd, BSS Microfinance Ltd, Asirvad Microfinance Ltd, and Bandhan Financial Services Ltd are some of the major players of this market.
Arohan Financial Service Ltd is the market leader in the micro-lending market of India. As of 2022, the company is active in 17 Indian states and has 2 million active end clients.
Another leading player in the Micro-lending market of India is Equitas Small Finance. The company has a network of 400 branches that consist of 22 states and 2 union territories.
The Indian micro-lending Industry is all set for massive growth in the forecasted period of 2022-2028. The market is projected to dominate worldwide by the end of 2028 with an estimated CAGR of 11%. The market bounced back after receiving setbacks during the global pandemic, even during the pandemic it served over 60 Mn clients from 620 districts of several Indian states. The market shows an excellent 90% collected efficiency throughout the pandemic. The market is driven by various factors affecting the market like the unbanked population, the increasing population of microenterprises, government support for microfinance, and digital technology & mobile penetration. Post-pandemic, the market showed remarkable growth with a noteworthy number of 130 million loan accounts. The market is ruled by major players like Equitas Small Finance and Arohan Financial Services. In the coming years, the Indian micro-lending market is set to dominate the world micro-lending market if it continued to grow at this rate.