Microfinance institutions remain in pain even as green shoots appear

Microfinance portfolios fall for the sixth straight quarter despite improved asset quality, as credit access tightens

Microfinance institutions (MFIs) are in a spot of bother: A continuous shrinking of their loan book and liquidity support from lenders. The fallout: The sixth consecutive quarterly decline in their portfolio to ₹1.31 trillion as of September 2025, from ₹1.6 trillion in March 2024 with about half a million customers getting pushed out of the ambit of these entities, according to data provided by Microfinance Institutions 

Network (MFIN). 

The situation is similar for the microfinance sector level across banks and small finance banks (SFBs). 

“It is ironic as the portfolio-at-risk (31-90 days past