Microfinance loans are those provided to low income individuals, groups and small businesses that wouldn't otherwise have access to financial services due to a lack of formal employment.
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Microfinance institutions (MFIs) have become a dominant player when it comes to extending smaller credit lines, with Karnataka alone seeing 1 crore loan accounts with a portfolio of Rs 46,000 crore outstanding as of March 2023, as per a report by Association of Karnataka Microfinance Institutions (AKMI) published on Tuesday. Across India, the loan portfolio of microfinance institutions stood at 3.48 lakh crore with 7 crore crore borrowers, the report said.
Microfinance loans are those provided to low income individuals, groups and small businesses that wouldn't otherwise have access to financial services due to a lack of formal employment.
The report, which covered 16,000 customers across seven districts in Karnataka, found that 89 per cent prefer MFIs over other lenders, and 90 per cent of them applied for loans that would contribute towards income generation. In FY22, the state’s microfinance loan portfolio stood at Rs 23,182 crore (the fourth highest in the country) noting a growth of 13 per cent.
By share of loan accounts, Mysuru dominated the state with 8,07,496 accounts making up for 8.8 per cent of Karnataka’s total microfinance portfolio. This was followed by Belgaum, Tumkur, Mandya and Hassan.
The report also highlighted that loans provided by MFIs has aided women in Karnataka to gain greater autonomy in running income generation activities and a greater say in family decision making.
“The doorstep delivery of microcredit has been a key development tool in Karnataka helping transform local communities and nurturing women’s entrepreneurial spirit. Karnataka is among the top five states in the country with the highest microfinance loan portfolio providing self-employment opportunities to over 56 lakh women belonging to low-income households,” said Karnataka Home Minister G. Parameshwara.