Microfinance portfolio drops 17% in Q2; 5 million borrowers exit credit

India's microfinance sector saw its sixth straight quarterly decline in gross loan portfolio in Q2 FY26, with sustained funding squeeze pushing nearly 5 million borrowers out of formal credit systems

Microfinance lenders had a gross loan portfolio (GLP) of Rs 3.39 trillion in the second quarter of the financial year (Q2 FY26), dropping 17 per cent from the previous year, said a report.

 

The funding squeeze has led to the sixth consecutive quarterly fall in GLP and almost 5 million borrowers exiting formal credit. Microfinance lenders had a GLP of Rs 4.08 trillion in Q2 FY25, according to the report by the Microfinance Industry Network (MFIN).

 

Sequentially, GLP was down almost 4 per cent from Rs 3.53 trillion in Q1 FY26.

 

NBFC-MFIs are the largest lenders in microfinance, having a