Microfinance sector seeks support to tackle its several challenges

Microfinance has shown capability and resilience in every crisis: Demonetisation or Covid-19. Attention to the issues it faces can make the sector even more vibrant

Microfinance plays a crucial role in fostering financial inclusion. It is an industry that supports almost 120-140 million households (through self-help group bank linkage and joint liability group, or JLG, model of lending) and caters to almost half the households: From bottom of the pyramid. The JLG model alone supports around 80 million households, with Rs 4 trillion loans outstanding. 

The sector faces several challenges; an important one is the perception that loans are priced at “usurious” rates. It is a fact that microfinance institutions’ (MFIs) loans have a higher cost than bank loans. Since they borrow money from higher