According to a recent report published by Allied Market Research, titled, “Microfinance Market by Provider and End User: Global Opportunity Analysis and Industry Forecast, 2021-2030,”. 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 provided to people looking to lend money to earn potentially high returns and borrowers who have no access to financial services such as banks or credit unions. Microfinance can be done to single microloans, and to diversify risk exposure, others invest across a portfolio of microloans. The services in the market are designed to become more affordable to poor and socially marginalized customers, households to have a wide variety of high-quality financial products and services, and to help them become self-sufficient.
COVID-19 Impact Analysis
Furthermore, during the COVID-19 outbreak, the microfinance market has experienced massive decline in revenue. For instance, in India, the second wave of the COVID-19 pandemic has drastically reduced repayment collection efficiencies in the microfinance sector, according to a statement by industry association Sa-Dhan. In addition, the collections have dropped upto 10%-20% in April-May 2021, as lockdowns were imposed in various key states across the country.
By provider, the banks segment acquired the major share of the microfinance market. The banks are adopting microfinance platforms significantly to support rise in consumer needs. The microfinance platforms have helped in filling existing gaps in financial services and increased efficiency for better customer experience, thus driving the market growth.
Region-wise, Asia-Pacific dominated the microfinance industry in 2020 and is expected to grow at the highest CAGR during the forecast period. This is attributed to surge in surge in government initiative to reduce poverty and to upsurge the living standard of the people, which is becoming some of the major microfinance market trends. Moreover, a large group of population lives in the rural areas where banking services are limited and therefore, microfinance plays an important role in providing finance to the population. In addition, there are three types of sources of microfinance, formal institutions (i.e., rural microfinance banks and cooperatives), semiformal institutions (i.e., nongovernment organizations), and informal sources (i.e., money lenders and shopkeepers).
In the wake of COVID-19 pandemic, microfinance organizations have experienced a moderate revenue growth. Moreover, revenue of the microfinance sector is more likely to remain under pressure even post lockdown, as social distancing norms are likely to continue, which discourages usage of mass transit systems. Conversely, decrease in physical banking among industry verticals is expected to positively impact the growth of the microfinance market. Thus, these factors promoted the growth of the microfinance market size during the pandemic situation.
Key Findings Of The Study
- On the basis of provider, the Micro Finance Institute (MFI) segment is expected to exhibit the fastest microfinance market growth rate during the forecast period.
- Based on end user, the small enterprises segment led the highest microfinance market share, in terms of revenue in 2020.
- By region, Asia-Pacific generated the highest revenue in 2020.
The key players operating in the microfinance market analysis 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. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.