Microfinance Market Outlook - 2030
The global microfinance market was valued at $178.84 billion in 2020, and is projected to reach $496.90 billion by 2030, growing at a CAGR of 10.8% from 2021 to 2030.
Microfinance is a type of financial service that is provided to unemployed or low-income individuals or groups with no other access to financial services. The aim of these institutions is the simple service offering micro-loans to the world’s unbanked populations, such as savings, insurance, and payment products in microfinance industry. The services in the market are designed to become affordable to poor and socially marginalized customers, households with a wide variety of high-quality financial products and services, and to help them become self-sufficient.
Market Drivers
Rise in number of microfinance organization help emerging countries for reducing poverty and also improve the standard of living of the poor people, which is significantly driving the growth of the microfinance market. In addition, shift from traditional lending to micro finance and lesser operating cost & low market risk are some other factors propelling the microfinance market growth. However, high interest rate and shorter repayment time given by microfinance companies hampers the growth of the microfinance market. On the contrary, increased penetration of advance technology such as mobile banking, ATMs, POS, and others in micro finance sector across developing nations is a major factor anticipated to provide potential microfinance market growth opportunity for the market.
The report focuses on growth prospects, restraints, and trends of the microfinance market analysis. The study provides Porter’s five forces analysis to understand the impact of various factors such as bargaining power of suppliers, competitive intensity of competitors, threat of new entrants, threat of substitutes, and bargaining power of buyers on the microfinance market outlook.
Type Insights
The microfinance market plays a crucial role in delivering financial services to populations that are often neglected, especially in developing countries. It provides small-scale loans, savings options, and insurance products designed for individuals and small enterprises that do not have access to conventional banking systems. Microfinance institutions (MFIs) aim to empower entrepreneurs, particularly women, by equipping them with the financial resources needed to start or grow their businesses. The sector features various types of microloans, including loans for income generation, emergency needs, and educational purposes. These loans typically come with lower interest rates than standard financial products, making them easier for low-income individuals to obtain. Furthermore, microfinance encompasses savings initiatives and micro-insurance, which assist clients in achieving financial stability and navigating risks. The emergence of digital microfinance solutions has transformed the industry, facilitating more effective and widespread access to financial services via mobile devices and online platforms. The microfinance sector is crucial for promoting financial inclusion, encouraging entrepreneurship, and enhancing socio-economic conditions by supporting those who are usually left out of established financial systems.
Technology Insights
The microfinance market plays a pivotal role in advancing financial inclusion, especially in rural areas. It encompasses a wide range of financial services that are tailored to low-income individuals or underserved communities. Microcredit, a key aspect of this market, provides small loans to those who do not have access to traditional banking services. These loans enable individuals to start or expand small businesses, improve their livelihoods, and enhance economic stability.
Rural finance, which is a subset of the microfinance market, focuses specifically on addressing the financial needs of people living in rural areas. Rural communities often lack access to mainstream financial institutions, leaving them vulnerable to poverty. Microfinance institutions (MFIs) bridge this gap by offering affordable financial products such as loans, savings, and insurance. These services are designed to meet the unique challenges faced by rural populations, such as limited access to capital, lack of collateral, and the need for financial literacy.
Financial inclusion is at the heart of the MFI industry. By providing financial services to the unbanked and underbanked, microfinance institutions (MFIs) and microfinance banks promote economic development and reduce inequalities. Through the effective use of micro finance lending, small business owners can grow their enterprises, while individuals can access crucial services like healthcare, education, and housing.
The microfinance loan system is typically offered by microfinance companies or microfinance banks, which have specialized knowledge of serving low-income clients. These institutions work closely with borrowers, often offering flexible terms and interest rates, ensuring that repayment schedules align with their incomes. The microfinance bank model has proven successful in many countries by building trust and fostering long-term relationships between the borrower and lender.
Application Insights
The microfinance industry, which focuses on providing financial services to low-income individuals and small businesses, has seen significant growth in recent years. The increase in the demand for financial inclusion, coupled with advancements in technology, has opened new avenues for microfinance institutions (MFIs) to expand their reach and enhance their services.
One of the key trends is rise in the adoption of digital platforms in microfinance. Mobile banking and digital lending platforms have transformed how microfinance services are delivered. These platforms enable individuals in remote or underserved areas to access loans, savings accounts, and insurance products without needing to visit a physical branch. The use of mobile phones and internet connectivity has enabled MFIs to expand their customer base, especially in emerging markets where traditional banking infrastructure is limited.
Another significant trend in the market is the shift in preference towards data-driven decision-making. MFIs are increasingly leveraging big data, artificial intelligence (AI), and machine learning (ML) to assess credit risk, personalize loan offers, and improve operational efficiency. These technologies allow for more accurate credit scoring, especially for individuals with limited credit history. By analyzing behavioral data and transaction histories, MFIs can offer tailored financial products that better suit the needs of low-income clients.
In addition, there is growing trend in the partnerships with microfinance institutions and fintech companies. These collaborations help scale microfinance operations and improve service delivery, offering wider range of products, such as micro-insurance, micro-pensions, and financial literacy programs, which contribute to the overall financial well-being of their clients.
Segment Review
The microfinance market is segmented into provider, end user, and region. Provider covered in the study include banks, Micro Finance Institute (MFI), NBFC (Non-Banking Financial Institutions), and others. By end user, the market is segregated into small enterprises, micro enterprises, and solo entrepreneurs or self-employed. Region-wise, the market is analysed across North America, Europe, Asia-Pacific, and LAMEA.
Competitive Analysis
The report analyzes the top microfinance companies operating in the market such as Annapurna Finance (P) Ltd, Bank Rakyat Indonesia (BRI), Bandhan Bank, CDC Small Business Finance, Cashpor Micro Credit, Grameen America, Grameen Bank, Kiva, Madura Microfinance Ltd., and Pacific Community Ventures Inc. These players have adopted various strategies to increase their market penetration and strengthen their position in the microfinance industry.
Recent Partnerships/ Product Launches in the Market
On October 17, 2023, Mikro Kapital launched the market’s first tokenized bonds for microcredit in collaboration with Bitfinex. This initiative aimed to link investors directly with microfinance borrowers, supporting financial inclusion. The first tokenized bond, with a three-year maturity and 10% interest rate, had a total size of 10 million USDT. Mikro Kapital planned more issuances following this initial launch.
On April 16, 2024, HSBC India and AGRI3 signed a Partnership Agreement to provide partial guarantees for transactions promoting sustainable agriculture, rural livelihoods, and forest protection. The first transaction involved a USD 50 million facility for the MFI Lending Program, enabling HSBC to provide loans for agricultural activities. The program, supported by IDH and MicroSave Consulting, aimed to enhance environmental sustainability through climate-smart agricultural practices. HSBC and AGRI3 planned to deepen their relationship to support corporate and NFBC-MFI clients.
On June 07, 2024, Muthoot Microfin announced a strategic co-lending partnership with the State Bank of India (SBI) to extend financial services to women entrepreneurs in rural and semi-urban regions. They will co-lend to members of Joint Liability Groups (JLGs) engaged in agricultural and income-generating activities, with loan amounts ranging from Rs 10,000 to Rs 3,00,000. Thomas Muthoot, Managing Director, emphasized the partnership's goal to support rural women and make a lasting impact on their lives.
On November 25, 2024, Muthoot Microfin began loan disbursals under a new co-lending partnership with the State Bank of India (SBI) to provide affordable credit to rural entrepreneurs, focusing on women and small businesses. SBI sanctioned a ₹500 crore limit, disbursed in ₹100 crore tranches. The initiative targeted Joint Liability Groups (JLGs) and individuals in income-generating ventures. CEO Sadaf Sayeed highlighted the collaboration's aim to promote economic self-reliance in rural and semi-urban India.
COVID-19 Impact Analysis
COVID-19 pandemic has a moderate impact on the microfinance industry, as the outbreak has enabled lending activities including past-due or non-collectible loans to become an implicit part of the financial sector. Moreover, various microfinance institutes were stopped by the government due to growing number of patients across the globe. In addition, the European government also introduced various other digital platform for microfinance company to sell their products and to attract their customer, which positively impacts the growth of the market. This, in turn, has become one of the major growth factors for the microfinance market during the global health crisis.
By Provider
Banks segment accounted for the highest market share in 2020
Top impacting factors
Shift from Traditional Lending to Microfinance
With increase in penetration of smartphones and internet users across the globe, online financing has witnessed significant growth in the recent years. Microfinance is considered as one of the convenient and widely used option for lenders, as it provides instant affordability for applications. Multiple businesses and individuals have started filling applications online for taking loans in the recent years rather than getting into the time-consuming lending process. According to a report by industry body MFIN and KPMG, the entry of new-age Fintech (Financial Technology) has enabled the microfinance sector to fast-track its transition to a more efficient digital model to serve a larger population at lower costs. In addition, the ease of applying loans for borrowers and numerous other benefits for lenders, such as automated loan management, and rapid approval are shifting their attention toward digital microfinance, thus driving the market growth.
High Interest on Small Amount And Shorter Repayment Time Provided by Micro Finance
Microfinance institutes and micro lenders charge high interest rate for various different loan amounts, which is the major factor that hampers the growth of the market. In addition, microfinance majorly focuses on increasing their revenue, owing to which their repayment time is short and charges are high. Microfinance institute borrow large amount of money from various banks and other institutes, owing to which they charge high interest rate and shorter repayment time, which hampers the growth of the market. Furthermore, various microfinance institutes in majority of countries across the globe need to use private equity to raise capital because they are not allowed to collect savings, like traditional microfinance banks, as a way to fund loans which negatively impact the growth of the market. In addition, rise in strict government regulation on microfinance institute hampers the growth of the market.
By End User
Micro Finance Institute (MFI) segment will grow at a highest CAGR of 11.9% during 2021 - 2030.
Adoption of Advance Technology in Micro Financing
Surge in adoption of digital technology among the micro financial sector to create new channels for the people and to upsurge their revenue opportunity boosts the market growth. In addition, increased connectivity in the developing nations and technological innovations in various African and Middle East countries are expected to provide lucrative opportunity for the market growth. Furthermore, large penetration of advance technology in microfinance sector such as mobile banking, ATMs, POS, and others, in developing nations is providing future opportunity for the market.
For instance, the Indian Government has designed various programs of financial assistance for existing and potential MSMEs. These programs aim to provide budding MSMEs with financial help so that they can establish and/or grow themselves to achieve their full potential. Moreover, major players of the market are introducing new technology to upsurge their market share and to provide customers with enhanced experience, which is expected to provide future opportunity for the market.
By Region
Asia-Pacific would exhibit the highest CAGR of 11.2% during 2021-2030
Key Benefits For Stakeholders
- The study provides in-depth analysis of the global microfinance market share along with current trends and future estimations to illustrate the imminent investment pockets.
- Information about key drivers, restrains, and opportunities and their impact analysis on the global microfinance market size are provided in the report.
- Porter’s five forces analysis illustrates the potency of buyers and suppliers operating in the microfinance market.
- An extensive analysis of the key segments of the industry helps to understand the microfinance market trends.
- The quantitative analysis of the global microfinance market forecast from 2021 to 2030 is provided to determine the market potential
Microfinance Market Report Highlights
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Analyst Review
Microfinance institutions globally provide financial and non-financial products & services mostly to low-income clients and unbaked population. The microfinance market is anticipated to witness robust growth in the emerging economies of LAMEA along with continued growth in the established market of Asia-Pacific. The growth is attributed to expansion of small businesses globally, improved interest rates, lending transparency, and lesser market risks. Increase in economic strength of the developing nations such as Singapore and India are expected to provide lucrative opportunities for the market growth.
The COVID-19 outbreak has a significant impact on the microfinance market and has accelerated the usage & adoption of microfinance in the market. In addition, though some states have classified the microfinance industry as an essential activity, the cash flows of borrowers may be affected due to the restrictions/lockdowns, thereby affecting their repayment ability, the rating firm said.
The microfinance market is consolidated with the presence of regional vendors such as Pacific Community Ventures Inc., Kiva, and CDC Small Business Finance. Some of the key players profiled in the microfinance market report include Annapurna Finance (P) Ltd, Bank Rakyat Indonesia (BRI), Bandhan Bank, Cashpor Micro Credit, Grameen America, Grameen Bank, Madura Microfinance Ltd. Major players operating in this market have witnessed significant adoption of strategies that include business expansion and partnership to reduce supply and demand gap. Major players are providing differentiated and innovative products with increase in awareness & demand for microfinance across the globe.
The Microfinance Market is estimated to grow at a CAGR of 10.8% from 2021 to 2030.
The Microfinance Market is projected to reach $496.90 billion by 2030.
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Factors such as rise in number of microfinance organization help emerging countries for reducing poverty and also improve the standard of living of the poor people drives the growth of the Microfinance market
The key players profiled in the report include Annapurna Finance (P) Ltd, Bank Rakyat Indonesia (BRI), Bandhan Bank, CDC Small Business Finance, Cashpor Micro Credit, Grameen America, Grameen Bank, Kiva, Madura Microfinance Ltd., and Pacific Community Ventures Inc, and many more.
On the basis of top growing big corporations, we select top 10 players.
The Microfinance Market is segmented on the basis of provider, end user, and region.
The key growth strategies of Microfinance market players include product portfolio expansion, mergers & acquisitions, agreements, geographical expansion, and collaborations.
subsegments of End User are small enterprises, micro enterprises, and solo entrepreneurs or self-employed.
Micro Finance Institute (MFI) segment will grow at a highest CAGR of 11.9% during 2021 - 2030.
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