Microfinance sector sees equity, borrowing and loan book shrink in FY25

The equity capital of pure-bred microfinance companies shrank 1.8% in 2024-25 while their outstanding annual borrowing saw a 36% drop as investors and banks tightened purse strings amid the stress in the sector.

These microfinance companies are classified as non-banking finance company-microfinance institutions (NBFC-MFI).

Total equity decreased 1.8% to Rs 35,759 crore at the end of March, the Microfinance Institutions Network (MFIN) said in its March quarter report. During 2024-25, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7% decrease from the previous financial year.


MFIN is one of the two self-regulators for the sector.

According to the data, banks contributed 78.4% of NBFC-MFIs’ total annual borrowing in 2024-25. Other NBFCs contributed 11.9%, followed by external commercial borrowing (5.1%) and other sources (4.6%).

The size of the gross microfinance loan portfolio contracted about 13.9% year-on-year to Rs 3.81 lakh crore at the end of 2024-25, according to CRIF High Mark data. The cumulative gross loan size for MFIN members declined 13.5% to Rs 3.75 lakh crore, as lenders slowed disbursement amid severe asset quality stress.

Among the regulated entities active in the microfinance segment, portfolio size of all entity types fell except for NBFCs, which saw a 4.1% year-on-year increase, said the MFIN report.

In terms of geographical coverage, east, northeast and south comprised 62.7% of the total microfinance portfolio. Portfolio quality as measured by PAR 31-180 – which indicates the percentage of a loan portfolio considered at risk of default within 31 to 180 days of delinquency – was 6.3% against 2.2% at the end of FY25.