Microfinance sector's contribution to GVA to be 2.7-3.5% by 2025-26: Study

The impact of the microfinance sector on Gross Value Added (GVA) of the economy is expected to be between 2.7 and 3.5 per cent by 2025-26, according to a study report released on Thursday.

The report, 'Present and Potential Contribution of Microfinance to India's Economy', was prepared jointly by MFIN, an association for microfinance entities, and National Council of Applied Economic Research (NCAER).

It presents an analysis of the contribution of microfinance institutions to the overall economy in terms of income or 'Gross Value Added', a measure of the national economic output and employment.

The MFIN-NCAER report points out that during 2018-19, the contribution of the microfinance sector as a whole, to India's GVA was 2.03 per cent.

The projected contribution of the microfinance sector to overall GVA, including the backward & forward linkages by 2025-26 would be a significant 2.7 per cent in the base case scenario and nearly 3.5 per cent in best case scenario, the report said.

Though the sector accounts for only a small part of the financial sector, the employment created is estimated to be about 1.28 crore jobs by the sector as a whole and 38.54 lakh jobs by the NBFC-MFIs alone, a significant contribution to the generation of employment, MFIN CEO & Director Alok Misra said

Microfinance has emerged as a major instrument for meeting the needs of lower income households by linking them to the financial resources to meet both productive and critical needs of credit," NCAER Director General Poonam Gupta said.