Chapter 4 - Section 4.5 - SubSection 4.5.1Assets of MLIs

The amount of loans outstanding is the key asset for the microfinance institutions and is an indicator of the strength of the balance sheet. It reflects the cumulative value of loans held by borrowers at a given point in time and indicates changes in lending activity, portfolio growth, and the sector’s overall outreach. Examining the trend in loan amount outstanding over time helps to assess the sector’s long-term growth trajectory, periods of expansion or contraction, and its recovery following periods of stress or market adjustment. The following analysis presents the movement in total assets and highlights the significant changes observed in 2026.

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MLI Total Assets- Yearly Trend

Composition of Total Assets of MLIs

4.5.1 Assets of MLIs

The amount of loans outstanding is the key asset for the microfinance institutions and is an indicator of the strength of the balance sheet. It reflects the cumulative value of loans held by borrowers at a given point in time and indicates changes in lending activity, portfolio growth, and the sector’s overall outreach. Examining the trend in loan amount outstanding over time helps to assess the sector’s long-term growth trajectory, periods of expansion or contraction, and its recovery following periods of stress or market adjustment. The following analysis presents the movement in total assets and highlights the significant changes observed in 2026.

Figure 4.5.1: MLI Total Assets- Yearly Trend
Figure 4.5.1

The trend shows a strong long-term expansion in the amount outstanding, rising from ₹46,247 crore in 2017 to ₹2,00,654 crore in 2026, representing more than a four-fold increase over the period. Growth was gradual during 2017–19, then accelerated steadily from ₹83,066 crore in 2020 to ₹1,48,477 crore in 2023. The amount peaked at ₹2,21,880 crore in 2024 before declining sharply to ₹1,45,110 crore in 2025. This contraction was followed by a strong comeback in 2026, with the amount rising about 38% year on year to ₹2,00,654 crore.

The recovery of 2026 indicates a substantial rebuilding of financial activity after the sharp correction in 2025. However, the amount outstanding still remains around 9.6% below the 2024 peak, suggesting that the sector has not yet fully returned to its earlier level. The sharp movements in the last two years may reflect changes in portfolio growth, funding availability, lending activity, institutional risk appetite and broader sectoral consolidation. Overall, the longer-term trajectory remains one of significant expansion, while the recent fluctuations indicate a period of adjustment followed by renewed growth in 2026.

Distribution of Assets

The asset composition of microfinance institutions shows how institutions deploy resources and how well assets remain aligned with the core lending business. Examining the distribution of assets across loan outstanding, liquidity, investments, fixed assets and other assets helps assess the sector’s business orientation, liquidity position and balance-sheet structure.

Figure 4.5.2: Composition of Total Assets of MLIs
Figure 4.5.2

The asset composition of microfinance institutions is rightly concentrated in net loan outstanding, which accounts for 72% of total assets. This reflects the sector’s lending focus and indicates that most institutional resources remain deployed in the core credit portfolio. Other assets account for 16%, followed by cash and cash equivalents at 7% and investments at 4%, while net fixed assets constitute only 1%. Other assets include receivables and other financial assets, deferred tax, and intangible assets.

The high share of loans outstanding, close to three-fourths, is in the right direction, indicating the sector’s continued focus on credit delivery and financial inclusion. The 7% share for cash and cash equivalents indicates the liquidity buffer to meet operational and repayment-related requirements. The relatively modest share of investments suggests that institutions primarily deploy available resources towards their lending business rather than financial investments. Similarly, the low share of fixed assets is consistent with the relatively asset-light operating model of microfinance institutions. Overall, the asset structure indicates a predominantly credit-oriented and relatively liquid balance sheet, with limited capital tied up in physical infrastructure.