State of Microfinance in India 2010

MicroSave's India Focus Note No. 40 provides an overview of the key issues and challenges facing Indian microfinance in 2010. It highlights the growth of the microfinance industry as well as its commercialization over the last few years.

The microfinance industry in India has achieved superlative growth in a period of economic downturn. Key features include:

• Indian microfinance has attracted the attention of a wide range of investors;
• SHG-bank linkage and the group lending MFI models recorded impressive increase in terms of number of households reached and volume of loans;
• Regional bias still exists with north and eastern India still being largely underserved;
• Deeper penetration has opened many organizations to new and diverse risks such as multiple lending and large loan size disbursement in poorer markets;
• Microfinance continues to see many not-for-profit MFIs transforming into for-profit nonbank financial corporations.

The note also examines the importance of offering a diverse range of financial services, potential of m-banking and the banking correspondent model for inclusion, and the need for meaningful social performance management.