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History of microfinance in india

history of microfinance in india


Brief History

In the decade leading up to 2009, the Non-Bank Finance Company-Micro Finance Institution (NBFC-MFI) model proved itself to be a viable and sustainable means of providing access to finance and meet the financial requirements of the bottom of the pyramid population. As a dedicated credit delivery channel for vast un-banked/under-banked segments, NBFC-MFIs have been playing a significant role in taking forward the Financial Inclusion agenda of the Government of India. What sets NBFC-MFIs apart is the fact that they do not depend on grants or subsidies to provide unsecured loans people with low incomes and no access to the banking system. Instead, they have used market oriented solutions that encourage self-reliance and entrepreneurship amongst its clients.

By 2009, NBFC-MFIs were contributing to a significant proportion of the aggregate Microfinance activity in India. In FY2009-10, this class of institutions had, at a pan-India level, succeeded in reaching out to over 23 million low income clients with total lending in excess of Rs 1800 Crores. As the NBFC-MFI industry grew, so did its need for transparency and better governance. It was against this backdrop that

the industry felt the need for an organization that would establish a framework for fair practices and client protection for NBFC-MFIs and promote the development of a robust Microfinance industry in India.

MFIN was established in October 2009 as a Society under the Andhra Pradesh Societies Registration Act 2001. As per MFIN Bye-Laws, all NBFCs registered with the RBI as NBFC-MFIs are eligible for membership of the Society. MFIN is to a large extent member funded. Its Governing Board comprises of Members elected from amongst the leadership of member MFIs. One third of the Board comprises independent Members.

The Reserve Bank of India (RBI) vide its letter dated 16th June, 2014 accorded recognition to MFIN as Self Regulatory Organisation (SRO) of NBFC-MFIs.

MFIN works closely with regulators and other key stakeholders and plays an active part in the larger financial inclusions dialogue through the medium of microfinance.


MFIN’s primary objective is to work towards the robust development of the microfinance sector, by promoting:

  • Responsible lending
  • Client protection
  • Good governance and
  • A supportive regulatory environment

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