Bharat Microfinance Report 2025

Indian Microfinance: Resilience, Responsibility & Inclusion

The State of Microcredit: A Panoramic View of the Microfinance Sector

2.1 Sector Overview clickhere

2.1.1 Key Performance Highlights

2.2 Loan Accounts clickhere

2.3 Loan Outstanding Analysis clickhere

2.4 Asset Quality and Delinquency Overview clickhere

2.5 Disbursement Overview clickhere

Mapping Microfinance Expansion Across India

3.3 Client Outreach of MLIs clickhere

3.4 Loan Outstanding clickhere

3.5 Distribution of Loans by Purpose clickhere

3.6 Going Beyond Credit: Credit-Plus Activities of MLIs clickhere

3.7 Conclusion clickhere

Performance of NBFC-MFIs in Microfinance

Operational Eminence of Micro Lending Institutions

4.1 Productivity of Workforce clickhere

4.2 Asset Quality in MLIs

4.3 Income and Expenditure Analysis clickhere

4.4 Self-Sustainability and Profitability clickhere

4.5 Balance Sheet and Capital Structure clickhere

SHG-Bank Linkage Programme: Moving from Financial Inclusion to overall wellbeing

5.3 SHG-BLP Activity since Inception clickhere

5.4 Joint Liability Group Financing: Complementing the SHG-Bank Linkage Channel

5.5 SHG Graduation to Enterprises clickhere

Financial Inclusion and Business Correspondent Model

Geographical Spread

Select & View Tables

Chapter 5 - Section 5.4Joint Liability Group Financing: Complementing the SHG-Bank Linkage Channel

Joint Liability Group (JLG) financing is an important complementary channel within India’s broader microfinance architecture. Cumulatively, JLGs credit-linked stood at 423.9 lakh as on 31 March 2026, registering year-on-year growth of 11.33%, with cumulative loans disbursed reaching ₹7,74,610 crore.

SHG-Bank Linkage Programme: Moving from Financial Inclusion to overall wellbeing

5.4 Joint Liability Group Financing: Complementing the SHG-Bank Linkage Channel

Joint Liability Group (JLG) financing is an important complementary channel within India’s broader microfinance architecture. While the SHG-Bank Linkage Programme is savings-led and built around group mobilisation, internal lending and collective financial management, the JLG model is primarily a credit-led mechanism designed to improve access to formal loans for individuals who may lack conventional collateral, documented land titles or a prior banking relationship. JLGs are particularly relevant for small and marginal farmers, tenant farmers, sharecroppers, oral lessees, landless cultivators, livestock rearers and other rural producers engaged in livelihood activities.

Under the JLG model, a small group of individuals with similar economic activities or livelihood interests accesses credit on the basis of mutual guarantee and joint liability. The model enables members to access loans individually or collectively, while peer accountability substitutes for conventional collateral. It can therefore help formal lenders reach borrowers who are otherwise excluded from institutional credit because of informal tenancy arrangements, limited asset ownership or inadequate documentation.

The JLG channel should be viewed as distinct from, rather than interchangeable with, the SHG-Bank Linkage Programme. SHGs generally build financial discipline through regular savings, internal lending and collective decision-making before accessing bank finance. In contrast, JLGs are primarily formed to facilitate credit access for economically active individuals, particularly in agriculture and allied sectors. The two models serve different, but overlapping, segments of financially excluded households

NABARD initiated a pilot project for financing Joint Liability Group (JLG) of landless and tenant farmers in 2004-05, primarily to provide a platform for credit linkage for such farmers. Since 2009-10, alongside providing refinance support to banks, NABARD has been awarding grant assistance to banks and eligible agencies (JLG Promoting Institutions, or JLGPIs) to support the formation, nurturing and capacity building of JLGs and their stakeholders.

Figure 5.9: No. of Credit-Linked JLGs (cumulative, in Lakh)

Figure 5.10: Credit Disbursed to JLGs (cumulative, ₹ in crore)

Figure 5.10: Credit disbursed to JLGs (cumulative, Rs in crore)

Cumulatively, JLGs (all JLG including MFI JLGs financed by banks) credit-linked stood at 423.9 lakh as on 31 March 2026, registering year-on-year growth of 11.33%, with the Southern and Eastern regions recording the highest absolute growth. Cumulative loans disbursed to JLGs by banks reached ₹7,74,610 crore, an increase of 6.59% from ₹7,26,686 crore as on 31 March 2025.

Box 5.1: MFI Accelerator Programme (MAP): A focused initiative of NABARD for strengthening smaller Microfinance Institutions

The MFI Accelerator Programme is a mentor led capacity building initiative conceptualised by NABARD with the help of Sa-Dhan (MFI SRO recognised by RBI) as a pilot initiative to strengthen identified 21 smaller MFIs operating in rural and underserved regions. The programme seeks to help participating MFIs graduate to the next level of institutional maturity by enhancing their governance systems, technology adoption, operational efficiency, risk management practices, human resource capabilities, regulatory compliance, and access to funding.

Through a structured model of training, mentoring, baseline assessments, and performance tracking, the programme provides customized support to MFIs to address specific institutional gaps and improve their sustainability and outreach. By strengthening the capabilities of smaller MFIs, the programme aims to expand responsible financial services to underserved communities, promote financial inclusion, and support livelihood generation and inclusive rural development.

The pilot aims to strengthen 21 select MFIs with an Asset Under Management (AUM) ranging from ₹10 crore to ₹500 crore, particularly those having at least 50% rural borrowers, satisfactory repayment performance and past record of profitability. Participating institutions undergo an extensive diagnostic assessment to identify areas of interventions. Based on the findings, a tailored development roadmap is prepared for each MFI, supported by mentors from the MFI industry who guide institutions in improving governance frameworks, strengthening risk controls, enhancing digital capabilities, diversifying products, and improving operational sustainability. The programme also facilitates knowledge sharing on regulatory developments, emerging technologies, customer protection principles, and best practices in sustainable microfinance.

Quick Insights from Baseline Survey

The participating MFIs were found to be broadly compliant and operationally stable, with strengths in formalisation, board functioning and financial performance.
Around 71% of MFIs were assessed in the medium-risk category and 29% in the high-risk category.
Key gaps were observed in governance depth, risk systems, HR capacity, digital integration and operational efficiency.
Financial sustainability was found to be under pressure due to high cost of funds and elevated cost-to-income ratios.

Courtesy: National Bank for Agriculture and Rural Development (NABARD)

List of Abbreviations

#	Abbreviation	Full Form
1	AA	Account Aggregator
2	ABCO	Average Borrower per Credit Officer
3	ABS	Active Borrowers per staff
4	AI	Artificial Intelligence
5	API	Application Programming Interface
6	APY	Atal Pension Yojana
7	AS	Accounting Standards
8	ATS	Average Ticket Size
9	AUM	Assets Under Management
10	BC	Business Correspondent
11	BF	Business Facilitators
12	BSBDA	Basic Savings Bank Deposit Account
13	CA	Chartered Accountant
14	CAGR	Compounded Annual Growth Rate
15	CAR	Capital Adequacy Ratio
16	ChatGPT	Chat Generative Pre-trained Transformer
17	CICs	Credit Information Companies
18	CLA	Co-Lending Arrangement
19	CLM	Co-Lending Model
20	CMI	Credit Market Indicator
21	CRPs	Community Resource Persons
22	CSA	Climate Smart Agriculture
23	CSR	Corporate Social Responsibility
24	D/E	Debt/Equity
25	DAY NRLM	Deendayal Antyodaya Yojana-National Rural Livelihood Mission
26	DAY NULM	Deendayal Antyodaya Yojana-National Urban Livelihoods Mission
27	DAY-NRLM	National Rural Livelihood Mission
28	DUGJY	Deen Dayal Upadhyaya Gram Jyoti Yojana
29	DEA	Depositor Education and Awareness
30	DoP	Department of Post
31	DPD	Days Past Due
32	ECB	External Commercial Borrowings
33	ECL	Expected Credit Loss
34	EDP	Enterprise Development Programmes
35	EIP	European Investment Plan
36	eKYC	Electronic Know Your Customer
37	EMI	Equated Monthly Instalment
38	ESG	Environmental, Social, and Governance
39	EV	Electric Vehicle
40	FACE	Fintech Association for Consumer Empowerment
41	FIs	Financial Institutions
42	FPOs	Farmer Producer Organizations
43	FSI	Financial Services Industry
44	FSSAI	Food Safety and Standards Authority of India
45	FY	Financial Year
46	GCC	General Credit Card
47	GDP	Gross Domestic Product
48	GJ	Gigajoules
49	GPFI	Global Partnership for Financial Inclusion
50	GRIP	Graduated Rural Income Generation Project
51	GST	Goods and Services Tax
52	HR	Human Resource
53	ICT	Information and Communication Technology
54	ID	Identity Document
55	IMF	International Monetary Fund
56	IRDAI	Insurance Regulatory and Development Authority of India
57	IVR	Interactive Voice Response
58	JEE	Joint Entrance Examination
59	JLG	Joint Liability Group
60	JLGPls	Joint Liability Groups Promoting Institutions
61	KCC	Kisan Credit Card
62	KFS	Key Facts Statement
63	KYC	Know Your Customer
64	LEDP	Livelihood and Enterprise Development Programme
65	LSPs	Loan Service Providers
66	MACS	Mutually Aided Cooperative Societies
67	MEDP	Micro Enterprise Development Programme
68	MGNREGA	Mahatma Gandhi National Rural Employment Guarantee Act
69	MLIs	Micro Lending Institutions
70	MMU	Mobile Medical Unit
71	MoRD	Ministry of Rural Development
72	MoSPI	Ministry of Statistics and Programme Implementation
73	MoU	Memorandum of Understanding
74	MSME	Micro, Small, and Medium Enterprises
75	MUDRA	Micro Units Development & Refinance Agency Ltd.
76	NABARD	National Bank for Agriculture and Rural Development
77	NBFCs	Non-Banking Financial Companies
78	NCD	Non-Convertible Debentures
79	NCDs	Non-Communicable Diseases
80	NDA	National Defence Academy
81	NEET	National Eligibility cum Entrance Test
82	NFHS	National Family Health Survey
83	NFP	Not-for-Profit
84	NGO	Non-Governmental Organizations
85	NOF	Net Owned Fund
86	NPA	Non-Performing Asset
87	NPS	National Pension System
88	NRHM	National Rural Health Mission
89	NRLM	National Rural Livelihood Mission
90	NSSO	National Sample Survey Office
91	OCEN	Open Credit Enablement Network
92	OD	Overdraft
93	OED	—
94	OECD	Organisation for Economic Co-operation and Development
94	ONDC	Open Network for Digital Commerce
95	OPEC	Organization of the Petroleum Exporting Countries
96	OSS	Operational Self Sufficiency
97	PACS	Primary Agricultural Cooperative Societies
98	PAN	Permanent Account Number
99	PAR	Portfolio at Risk
100	PFRDA	Pension Fund Regulatory and Development Authority
101	PIB	Press Information Bureau
102	PLFS	Periodic Labour Force Survey
103	PMFBY	Pradhan Mantri Fasal Bima Yojana
104	PMJAY	Pradhan Mantri Jan Arogya Yojana
105	PMJDY	Pradhan Mantri Jan Dhan Yojana
106	PMJJBY	Pradhan Mantri Jeevan Jyoti Bima Yojana
107	PMMY	Pradhan Mantri Mudra Yojana
108	PMSBY	Pradhan Mantri Suraksha Bima Yojana
109	POs	Producer Organizations
110	PSBs	Public Sector Banks
111	QoQ	Quarter on Quarter
112	QR	Quick Response
113	RBI	Reserve Bank of India
114	RCBs	Rural Cooperative Banks
115	RE	Regulated Entity
116	ROA	Return on Assets
117	ROE	Return on Equity
118	RRBs	Regional Rural Banks
119	SC/ST	Scheduled Castes/Scheduled Tribes
120	SDGs	Sustainable Development Goals
121	SFB	Small Finance Bank
122	SGSY	Swarnajayanti Gram Swarozgar Yojana
123	SHG	Self-Help Group
124	SHG-BLP	Self-Help Group Bank Linkage Programme
125	SHPIs	Self Help Group Promoting Institutions
126	SIDBI	Small Industries Development Bank of India
127	SME	Small and Medium-sized Enterprises
128	SRLM	State Rural Livelihoods Mission
129	SROs	Self-Regulatory Organizations
130	TLE	Transfer of Loan Exposures
131	UI	User Interface
132	ULI	Unified Lending Interface
133	UPI	Unified Payments Interface
134	US	United States
135	UTs	Union Territories
136	WASH	Water, Sanitation, and Hygiene
137	WEAF	Women Enterprise Acceleration Fund
138	WE-LEAD	Women Entrepreneurship Livelihood Enhancement and Development
139	YEP	Youth Entrepreneurship Program
140	YoY	Year on Year

Glossary

ABCO

ABCO is an acronym for Active Borrower per Credit Officer. It is a key operational metric in microfinance that measures the client-to- credit officer ratio, indicating the average number of active borrowers managed by each credit officer. It is also commonly referred to as the Case Load. This will also indicate the efficiency of operation, which can impact the operational expenses

Active Borrowers

The individuals whose loan accounts are current have an outstanding loan balance with the MFI, and are under repayment obligation. Individuals who have multiple loans with an MFI should be counted as a single borrower.

Assets Under Management (AUM)

Assets Under Management (AUM) refers to the total value of client loan portfolios that an institution actively manages, including both on- book and off-balance sheet (off-BS) portfolios. This includes all outstanding principal from current, delinquent, and renegotiated loans, but excludes loans that have been written off, on the own book, as well as those securitized or direct assignment assets resting on the securitization partners. AUM reflects the overall scale of financial assets the institution is responsible for, regardless of ownership.

Average Loan Size

Average Loan size represents the client-per- capita loan amount. It is calculated as the Loan portfolio divided by the number of clients of an MFI. It is a key indicator used to assess the scale and depth of credit outreach.

Average Ticket Size (ATS)

Average Ticket Size (ATS) refers to the average loan amount disbursed per loan during a specific period of time. This metric is typically calculated for a defined time period such as monthly, quarterly, or annually, depending on the reporting or analysis needs. It is calculated as the Total Loan Amount Disbursed divided by the Total Number of Loans Disbursed.

Borrowing Cost

The cost of borrowing refers to the total charge incurred for taking a debt obligation, which includes interest payments as well as any additional financial fees (such as processing fees, service charges, insurance premiums, or administrative costs). A percentage of such cost over the total amount borrowed indicates the rate of such cost.

Capital Adequacy Ratio

Capital Adequacy is a key financial indicator used to measure the solvency and risk-bearing capacity of Microfinance Institutions (MFIs). It reflects the institution’s ability to absorb potential losses and protect depositors and creditors. It is the proportion of the equity capital and free reserves or own funds held by an MFI against its total risk-weighted assets. A higher Capital Adequacy Ratio indicates stronger financial health and a greater ability to withstand credit or operational shocks. A minimum requirement of an NBFC-MFI is 15%.

Capital to Total Assets

The Capital to Total Assets ratio is a measure of an institution’s financial strength and stability. It indicates the proportion of an institution’s own capital (or net worth) relative to its total assets.

Co-lending

Co-lending is a financial arrangement in which two or more regulated entities join hands to extend a loan, by taking a fixed share by each entity. It will reflect on the books of all the partnering institutions. Typically, a bank and a non-bank financial institution (NBFC or NBFC-MFI) or HFC can join together to extend credit to a borrower and a prefixed ratio at a weighted average interest rate. The partnership combines the strengths of both entities.

Debt-Equity Ratio

The Debt-Equity Ratio is a key financial metric that indicates the proportion of total debt to total equity held by an institution at a given point in time. It reflects the degree to which an organization is financing its operations through borrowed funds versus own funds or free capital. It also indicates the leverage of capital of an entity

Debt Funding

Debt Funding refers to the portion of a financial institution’s loan portfolio that is financed through external borrowings, rather than from internal accruals or equity capital. It reflects the extent to which an institution relies on borrowed funds, such as loans from banks, financial institutions, or capital markets, to support its lending activities.

External Cost

External Cost refers to the finance cost incurred by Microfinance Institutions (MFIs) on the borrowed funds from external sources, primarily banks and financial institutions. This cost is largely determined by the prevailing lending rates of banks, and as such, it is beyond the direct control of MFIs.

Finance Cost

Finance Cost refers to the actual interest and other financial expenses incurred by a Microfinance Institution (MFI) on the average borrowed funds that remain outstanding during a given period. This metric is crucial for evaluating the cost-efficiency and funding strategy of MFIs, and plays a key role in determining their lending rates and financial sustainability.

Financial Inclusion

Financial Inclusion refers to the delivery of affordable, accessible, and appropriate financial services to disadvantaged and low-income segments of society who are traditionally excluded from the formal financial system. These services include savings, credit, insurance, remittances, pensions, banking services, etc.

Joint Liability Groups

Groups of 4 to 8 borrowers come together to borrow from a financial institution under a joint liability concept, as per which there is an inter se agreement between the members whereby each borrower is liable to repay the loan of each member of the group.

Margin

Margin refers to the difference between the total yield on the loan portfolio and the finance cost incurred to fund that portfolio. It represents the net earnings a Microfinance Institution (MFI) makes from its lending activities before operating expenses and provisions.

Managed Loan Portfolio

Managed Loan Portfolio refers to the loan assets originally originated by Microfinance Institutions (MFIs) but subsequently sold or assigned to a third party, such as a bank, to improve liquidity. Despite the sale, MFIs continue to manage these loans, including activities like collection of repayments and servicing the accounts on behalf of the purchasing institution. This arrangement helps MFIs free up capital while maintaining their relationship with borrowers and ensuring ongoing portfolio management.

Non-Performing Assets (NPA)

A Non-Performing Asset (NPA) is a debt obligation where the borrower has failed to honour repayment commitments, either interest, principal, or both, to the designated lender for a specified period, typically 90 days or more. As a result, the NPA ceases to generate income for the lender in the form of interest or principal repayments. NPAs represent credit risk and affect the financial health and asset quality of lending institutions.

On-book Portfolio (Net Loan Portfolio)

On-book Portfolio (Net Loan Portfolio) refers to the total outstanding principal of all active client loans recorded on the institution’s balance sheet. This includes current, delinquent, and renegotiated loans, but excludes loans that have been written off. Interest receivable is not included, except for Microfinance Institutions (MFIs) that report under Ind-AS, where such interest is recognized as part of the outstanding amount.

Operating Self Sufficiency (OSS)

Operating Self Sufficiency (OSS) measures the extent to which a Microfinance Institution’s (MFI’s) income from operations and investments is sufficient to cover its operating expenses, like operating costs, loan loss provisions, and finance costs (cost of borrowed funds) incurred for conducting the operations. An OSS ratio of 100% or above indicates that the MFI is generating enough income to sustain its operations without requiring subsidies or external support, reflecting financial viability and sustainability.

Outstanding Borrowings

Outstanding Borrowings refer to the total amount of funds that an entity has borrowed and has not yet repaid as of a specific reporting date. This includes all short-term and long- term debt obligations, such as loans, credit lines, bonds, and other forms of financing, net of any repayments made.

Portfolio Quality

Portfolio Quality refers to the level of credit risk present in a loan portfolio, indicating the likelihood of default by borrowers. A high- quality portfolio contains a lower amount of risk, characterized by timely repayments and minimal defaults. Maintaining good portfolio quality is crucial for the financial health and sustainability of lending institutions.

Portfolio at Risk (PAR)

Portfolio at Risk (PAR) indicates the proportion of outstanding amounts of all loan accounts having past due/arrears to the total outstanding loan. In general, PAR 30 refers to the percentage of the loan portfolio that remains unpaid 30 days or more beyond the due date, which would be used as a measure to assess the portfolio quality. Loans with dues overdue by 90 days or more (PAR 90) are generally classified as Non-Performing Assets (NPAs).

Qualifying Assets

Qualifying Assets are loan portfolios created by MFIs adhering to certain conditions as prescribed by RBI, to make the MFIs eligible to be called as MFIs and to raise loans from banks under the Priority Sector Advances Scheme (as per recent RBI norms). For an MFI, 60% of the total ass ets need to be under this category

Return on Assets (RoA)

Return on Assets (RoA) is the universally accepted profitability measure, which, in essence, is the percentage net income earned out of total average assets deployed by MFIs during a given period, typically one financial year. It is a widely used profitability metric that measures how efficiently an institution utilizes its total assets to generate net income.

Return on Equity (RoE)

Return on Equity (RoE) is a key profitability indicator that measures the net income earned by a Microfinance Institution (MFI) relative to its average equity during a given period, typically one financial year. RoE reflects how efficiently an MFI is using its own capital (equity) to generate profits.

Self Help Groups (SHGs)

SHGs refer to groups of 10-20 persons coming together to form an informal community-based institution to meet their common financial and social needs. Most of the SHGs are formed by women from a homogeneous background. SHGs collect regular savings from members and use them for internal lending, before accessing higher amounts from banks.

SHG Bank Linkage Programme (SBLP)

SHGs are linked to mainstream banks for keeping their surplus savings and also to obtain loans. The loan is often given as a multiplier of the total internal savings accrued in a group. It is considered to be an effective strategy to ensure financial inclusion for the unbanked poor people.

Surplus

Surplus refers to the excess of income over expenses. It is calculated as the difference between the yield (i.e., income earned from the loan portfolio) and the total cost (including finance cost, operating expenses, and provisions). It can also be referred to as net margin.

Yield on Portfolio

Yield represents total income from microcredit operation - interest income, processing fee/ service charge – earned out of the average loan portfolio outstanding for a specific period. It does not include investment income. It is a good proxy/surrogate for loan interest rates. It serves as a useful proxy for the effective loan interest rate charged to clients and is often used to assess the pricing structure and earning capacity of the loan portfolio.