Financial performance of microfinance institutions in India: Evidence and implications

This paper traces the evolution of the microfinance function, which has been the backbone of rural and semi-urban areas in India and is a powerful tool for reducing dependency on informal sources. Microfinance institutions and self-help groups are significant in financial inclusion and access to formal credit for the rural poor. The study examined the growth of the financial performance of Microfinance institutions. Secondary data was extracted from the Status of Microfinance in India, NABARD. The main findings and implications of the study are as follows: India’s rural populations lack access to finance from formal sources. Microfinance institutions have tried to fill the space. Among these, the annual growth rates of bank loans disbursed to SHGs and MFIs were (16.42%) and (0.26%) and the outstanding growth rates of SHGs and MFIs were 16.64% and 11.71%, respectively. The highest bank loan was disbursed to the southern region (65.6%), while the lowest to the northern region (1.42%) of the total loan disbursed. Further scope for expanding formal credit in backward regions by the government and microfinance institutions must work together to provide formal access to rural areas.