Top 10 Microfinance Companies in India in 2024

May 22nd 2024
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List of Microfinance Companies 2024

Microfinance in India has been rapidly expanding as a viable financial service due to the emergence of Microfinance NBFCs, the growth of self-help groups business by Public Sector Banks and the implementation of the NRLM or National Rural Livelihood Mission. 

The banking industry has seen the emergence of Microfinance banks and companies and increased participation from major private sector banks. Despite facing external shocks, the industry has shown resilience and has become one of the fastest-growing and most profitable segments in lending. As a result, it has positively impacted the lives of numerous facilities served by the financial sector. 

Definition of Microfinance Companies in India and Their Core Principles

Microfinance Companies/Institutions or MFIs are financial organizations that offer small loans to individuals without banking access. The definition of “small loans” varies by country with microloans or small loans in India being any loan below 1 lakh rupees. Another alternative to consider is personal loans, which can serve a similar purpose as MFIs in providing financial support. 

History of Organized Microfinance in India

The banks face significant challenges in providing loans to the poor, including security issues and high operating costs, which has prompted the emergence of microfinance in India. The alternative method aims to promote financial inclusion and equality by offering loans to those who are unable to access traditional banking services. 

SEWA Cooperative Bank, founded in 1974 by Ela Bhatt, is a pioneering microfinance institution in India. The National Bank for Agriculture and Rural Development (NABARD) played a significant role in providing financial services to unbanked individuals, particularly women, by introducing the Self-Help Groups (SHGs) model. Today, the SHG-Bank linkage programme in India has 79 lakh SHGs with savings accounts and involves the collaboration of Regional Rural Banks (RRBs), commercial banks and cooperative banks. The origins of SHGs in India can be traced back to the establishment of the Self-Employed Women’s Association or SEWA in 1972. 

List of Top Microfinance Companies in India

Here is the list of all microfinance banks that are currently operating in India along with the names of the states where they are located - 

 

State

Name of the NBFC (MFI)

Andhra Pradesh

Asmitha Microfin Limited

Future Financial Services Ltd.

Maanaveeya Holdings & Investments Pvt. Ltd.

Share Microfin Ltd.

SKS Microfinance Private Ltd.

Spandana Sphoorty Finance Ltd.

Nano Financial Services India Pvt. Ltd.

Microsupport Financial Services Ltd.

CRESA Financial Services Pvt. Ltd.

Keertana Financial Ltd.

SWAWS Microcredit Cor. India Pvt. Ltd.

G.P. Mass Finance Ltd.

Sai Adarsha Finance & Investments India Pvt. Ltd.

The Bellwether Microfinance Fund Pvt. Ltd.

Bharatiya Samrudhi Finance Ltd.

Jacinth Finvest Pvt. Ltd.

Saadhana Innovative Financial Products And Services Ltd.

Dovefin Microfinance Pvt. Ltd.

Gujarat

Chandan Dhara Finance Ltd.

Karnataka

BSS Microfinance Private Ltd

Janalakshmi Financial Services Ltd.

Ujivan Financial Services Ltd.

New Delhi

Saija Finance Pvt. Ltd.

Star Global Resources Pvt. Ltd.

Vikram Finlease Pvt. Ltd.

Mimoza Enterprises Finance Ltd.

Bhartiya Samruddhi Finance Ltd.

Comet Leasing & Finance Ltd.

Orissa

M/s. Adhikar Micro Finance Pvt. Ltd.

Rajasthan

Sahayata Microfinance Pvt. Ltd.

Uttar Pradesh

Nimisha Finance India Pvt. Ltd.

Sonata Finance Pvt. Ltd.

West Bengal

Bandhan Financial Services Pvt. Ltd.

Disari Savings & Credit Corpn Ltd.

Grameen Financial Services Pvt. Ltd.

Village Financial Services Pvt. Ltd.

 

Microfinance Institutions vs Small Finance Banks

Microfinance companies and Small Finance Banks (SFBs) are both significant contributors to financial inclusion in developing economies such as India. However, there are distinct differences between them in terms of regulatory framework, available financial products and the specific customers they cater to. 

Particular

Microfinance Institutions

Small Finance Banks

Function

MFIs are specialized non-banking financial companies (NBFCs) that focus on providing small loans to marginalized communities, with a particular emphasis on empowering women in rural and underdeveloped regions

SFBs are financial institutions that hold a banking license and focus on providing a variety of financial products and services to underserved markets. SFBs offer a broader range of services than microfinance companies, aiming to meet the diverse financial needs of customers in these areas

Regulation

The Reserve Bank of India (RBI) regulates MFIs based on NBFC guidelines

SFBs have to adhere to more stringent regulations than MFIs. This is to maintain and ensure the safety of customer funds, similar to the regulations applied to commercial banks 

Products

MFIs mainly concentrate on providing small, short-term loans to individuals and small businesses. In addition to microloans, they may offer limited deposit products as well. However, the focus remains on providing access to credit for underserved communities and individuals

SFBs provide a wide range of financial services including microloans, SME loans, deposit accounts, remittance services and other essential banking products. These offerings cater to the diverse financial needs of individuals and businesses, thereby fostering financial inclusion and economic growth

Funding

MFIs heavily depend on borrowing funds from various sources such as banks, wholesale lenders and multilateral agencies. However, this exposes them to risks associated with fluctuating interest rates

SFBs have the advantage of having access to various funding sources, such as customer deposits, enabling them to provide more attractive interest rates on their loans. This can make them a more appealing option for individuals and businesses seeking financing. Additionally, SFBs’ ability to offer competitive rates can contribute to increased accessibility to financial services for a wider range of customers

 

Factors to Consider When Choosing a Microfinance Institution

Choosing the right MFI requires considering various factors:

  • Services Offered: When selecting a microfinance institution, it is important to consider if they provide services that align with your specific goals. This may include offering loans, savings accounts, insurance or even business development support. Ensure the MFI you choose offers the relevant services that can help you effectively meet your financial objectives
  • Interest Rates and Fees: You can compare the interest rates and fees charged by different microfinance institutions to find the best option for your financial needs. Look at the Annual Percentage Rate (APR) and any additional fees to get a complete picture of the cost. This comparison will help you make an informed decision and choose the MFI that offers the most favourable terms for your situation
  • Eligibility Criteria: Check if you meet the eligibility requirements for the products you need from the MFI
  • Reputation: Research the reputation of the MFI in terms of client service, transparency and social impact. Find information about how well they serve their clients, how transparent they are in their operations and the positive social impact they have on the communities they work with. Look for reviews, testimonials and any relevant data or reports that can give you an understanding of their reputation in these areas
  • Social Impact: When assessing the social impact of an MFI, it is important to consider its focus on areas like women empowerment and environmental sustainability. By prioritizing these aspects, the MFI can contribute significantly to addressing social and environmental challenges within the communities it serves. This includes providing financial services tailored to the needs of women and supporting eco-friendly initiatives, thereby fostering positive change and sustainable development 

Conclusion

Microfinance has indeed become a vital resource for financial inclusion in India, particularly for communities that were previously neglected. The emergence of Microfinance NBFCs, the proliferation of self-help groups and government programmes like NRLM have contributed to its substantial growth. This expansion has been driven by factors such as enhanced credit accessibility, elevated financial literacy and the empowerment of female entrepreneurs. 

Microfinance companies need to embrace technological advancements, offer financial literacy programmes and maintain ethical lending practices to ensure continued success. By addressing these aspects, microfinance can solidify its position as a key driver of inclusive growth in India. 

Frequently Asked Questions (FAQs)

 

Q. Which is the biggest microfinance company in India?

A.: Equitas Small Finance Bank is considered one of the premier microfinance institutions in India due to its significant assets under management, extensive loan portfolio, and broad outreach. While there are other notable players in the industry, Equitas's strong performance and comprehensive offerings place it among the top microfinance companies in the country.

Q. How many microfinance companies are there in India?

A.: India has a large number of microfinance institutions serving underserved communities across the country. The exact count may vary due to new institutions and industry changes, but many microfinance companies are operating in India. They play a significant role in providing financial services to those who lack access to traditional banking options.

Q. What are some challenges faced by microfinance companies in India?

A.: Microfinance companies in India face a wide range of challenges. These challenges include complying with regulations, managing risks when lending to low-income borrowers, maintaining repayment discipline, accessing affordable funding, and meeting the diverse financial needs of their clients without compromising sustainability.

Q. What distinguishes the top microfinance companies from others in India?

A.: The top microfinance companies in India are known for their dedication to financial inclusion and reaching out to underserved communities. They stand out for their innovative product offerings, solid risk management practices, transparent operations, and their positive impact on alleviating poverty and promoting socioeconomic development.

Q. What role do microfinance companies play in poverty alleviation?

A. Microfinance companies play a vital role in reducing poverty by offering financial services to low-income individuals and communities. These services empower people to invest in income-generating activities, manage emergencies, and build assets over time. In addition, microfinance fosters entrepreneurship, employment generation, and economic resilience, thereby contributing to sustainable development for disadvantaged populations.

Q. How can individuals support the work of microfinance companies in India?

A.: Individuals can support microfinance companies in India in various ways. This includes investing or donating to microfinance institutions, volunteering to mentor entrepreneurs and promote financial literacy, advocating for policies that promote financial inclusion, and supporting businesses that prioritize ethical practices. These efforts contribute to the growth and sustainability of the microfinance sector and its impact on poverty reduction and economic empowerment.

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