Top 10 Leading Microfinance Companies In India

Nowadays, it is very easy for anyone to take a small loan to open a business or self-employment. All thanks to Microfinance Institutions.

You need not be rich, own assets, or pay taxes to avail of these small loans: these loans, called microfinance, are specially given for people to rise above the poverty line and earn a decent living.

To understand how the system works, let us understand microfinance. But Before that, you must know what is NBFC as these both terms are somewhat linked together.

What is Microfinance?

Microfinance is nothing new to India. People in urban, semi-urban, and rural areas of India need some sort of financial help for their business and other requirements.

These people are hesitant to seek the help of banks because of the long list of formalities to be fulfilled to get the required money.

This is where microfinance companies can help them out.

These are financial institutions that offer small-scale financial services.

The pioneer of microfinance in India was the now-defunct Anyonya Cooperative Bank Ltd which opened in Vadodara in 1889 with a capital of Rs.79.

Its main function was to offer small loans to impoverished farmers. It was launched by a group of 23 people who wished to prevent Indian farmers from falling prey to loan sharks who charged very heavy interests.

The microfinance sector of India flourished though it was somewhat unorganized during the colonial era.

To ensure that more people benefit from microfinance and rise above poverty, the Indian government regulated the sector in 1950.

Today, there are 82 major microfinance institutions in India, which offer small loans to help people rise from poverty.

If you wish to open a small business or get self-employed by running a service such as auto-rickshaw, among others, you can consider approaching any good microfinance institution in your area.

Benefits of Microfinance Institutes

There are certain benefits of Microfinance Institutes that ultimately help the general public in India, and the benefits are as follows:

  • Microfinance groups mainly focus on rural area development.
  • In microfinance, one will get the loan on a credit basis, whereas bank doesn’t extend their credibility.
  • According to the survey, it is noticed that about 95% of women and disabled people apply for micro-loans. 
  • Microfinance Institutes eradicate poverty and circulate the money, which increases investment opportunities.
  • Through Microfinance Institutes, job opportunities also arise.
  • It also inspires people to save money for their future.
  • The microfinance institutes focus more on women empowerment, and the MFIs targets women borrowers to take a loan as they never fail in loan repayments.

List of 10 Best Microfinance Institutions in India:

There are several microfinance institutes. After doing immense research, we have listed the top 10 Microfinance institutes which help poor people by providing micro-loans. The institutes are as follows;

1) Equitas Small Finance

Equitas Small Finance was established in 2007, and the M.D. and CEO of the Equitas Small Finance bank are P.N. Vasudevan. 

Initially, the Equitas small finance bank was a microfinance institute.

In 2007, when Equitas small finance bank saw the Andra Pradesh crisis, and in 2011, started diversifying their products in used commercial vehicle loans, small business loans, new commercial vehicle loans, and MSE finance.

The Equitas small finance bank takes a loan from other banks, wholesale deposits, CASA, term deposits.

The CASA ratio of Equitas small finance banks had increased from Q4FY21 34 percent to Q2FY22 40 percent. In 2016, the Return on assets (ROA) was 3 percent, and in FY20, it was 1.4 percent, and in FY20, Return on Equity (ROE) was 9.7 percent.

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2) ESAF Microfinance & Investments (P) Ltd

ESAF Microfinance & Investment (P) Ltd was established in May 2016 in Kerala, and it received its license in November 2016. The MD and ESAF Microfinance & Investment LTS are Kadambelil Paul Thomas.

The products of the ESAF are microfinance loans, retail loans, and other loans and advances, which also accept deposits, provide the loans, and open a CASA account.

The CASA ratio of the ESAF in FY20 was 13.66 percent, and on December 31, 2020, it improved to 16.53 percent. In FY20, the ROA of ESAF was 2.3 percent, and the ROE was 19.3 percent.

The international agencies studied every money invested in ESAF, and they disclosed that the social Return on investment erects at Rs. 3.19.

It also converged the carbon offset from the international market of 20 million tones.

3) Fusion Microfinance Pvt Ltd

Fusion Microfinance Pvt Ltd was established in 2010, and the MD/ CEO of the Fusion Microfinance is Devesh Sachdev.

The company mainly focuses on the women living in ruler and semi-urban areas. They help the women entrepreneurs become economically independent and literate them for their finances.

Fusion offers microloans to MSME (Micro Small Medium Enterprises). The products are Income Generation Loans, Top-up loans, Emergency Loans, Cross-sell loans.

Fusion actively has 1.8 million customers, and it has a network of 591 branches.

4) Annapurna Microfinance Pvt Ltd

Annapurna Microfinance Pvt Ltd was established in 2009, and its primary purpose was to serve the economically weaker section of people.

The Annapurna Microfinance Pvt Ltd provides financial and non-financial services. The AMPL also provides customized loans to its clients, whereas AFPL utilizes the group lending model (SHG and JLG) for providing loans to poor women.

The MSME finance includes housing finance, samartha loans (Disable and financial weaker section of the society), Safe Water and Sanitation to households (SWASTH), Dairy development loan, Solar loans, Consumer durable loans, PMSVANidhi Loan, etc.

Annapurna Microfinance Pvt Ltd has 870 branches in 18 states, and 20 lakhs total borrowers.

5) Arohan Financial Services Ltd

Arohan Financial Services Ltd was established on September 27, 1991, and it is a part of the Aavishkaar group that provides business solutions for social and environmental change.

The Arohan Financial Services is the fifth largest NBFC-MFI in India and Eastern India, according to the CRISIL Report.

The products of Arohan Financial Services are classified into credit and insurance. In contrast, credit products include income-generating loans and other loan products for household purposes, including life and health insurance.

On September 30, 2020, the Arohan financial services catered to 2.21 million customers in 17 states and 710 branches in 11 branches, and the MSME lending business have ten branches in eight states.

6) BSS Microfinance Ltd

BSS Microfinance Ltd was established in 1999 as a Trust, and in April 2008, the trust converted into a company. Simultaneously, the BSS Microfinance Ltd runs the Kotak Mahindra Bank’s business activities that expand the microloan credibility for poor women to generate income for eradicating poverty.

The company has its reach in four states: Karnataka, Maharashtra, Madhya Pradesh, and Tamil Nadu.

The BSS Microfinance Pvt Ltd provides loans to correspondent business activities of Kotak Mahindra bank.

The firm provides micro-loans from Rs.12,000/- up to Rs. 50,000.

  7)  Asirvad Microfinance Ltd

Asirvad Microfinance Ltd was established on August 29, 2007, and got an NBFC license on December 14, 2007. In Feb 2015, the Manappuram Company took 85 percent of its stakes, and now they hold 94.78 percent of stakes.

The Asirvad Microfinance Pvt Ltd products vary in Microfinance, MSME, Gold loan. The company’s funding comes from the funding agencies such as Foreign Banks, Public sector Banks, Private Sector banks, etc., and Manappuram Finance.

On May 21, 2021, the company had raised the world business capital, i.e., US$ 15 Million. The Asirvad Finance Pvt Ltd has 832 branches in 19 states and Union territories.

8) Cashpor Micro Credit

IN 1996, Cashpor Microcredit was established in Varanasi, and it is a subsidiary of Cashpor Financial and Technical Services (CFTS). 

The institute mainly focuses on the poverty section of society. It also identifies the women’s fall below the poverty line in rural areas and helps them by providing microcredit to generate an income.

Cashpor Micro Credit provides the loans such as Income Generation Loans, Emergency Loans, and Bada Loans.

The Cashpor Micro Credit has 341 branches in 31 districts.

9) Bandhan Financial Services Ltd

The Bandhan Financial Services Ltd was established in 2001, and it was situated in the village of Kolkata. The Bandhan mainly focuses on empowering women and reducing poverty by providing loans to India’s women’s and low-income groups.

The company has its presence in 22 states and Union territories. The services Bandhan provides to its customers are Bandhan Microfinance Suchna Loan, Bandhan Microfinance Srishti loan, Bandhan Microfinance Samriddhi Loan, and Bandhan Microfinance Suraksha, Bandhan Microfinance Susikhsha Loan, Bandhan Microfinance Fisheries Loan.

The Bandhan applies 18 percent GST on the banking services they provide.

The main target of the Bandhan to improvise is in the health sector, education sector and to eradicate the unemployment. 

10 ) Fincare Business Services Ltd

Fincare Business Service Ltd was established on August 1, 2014, as a private limited company, and in 2016 it converted into a public limited company and transmitted into a Non-Deposit taking Systematically Important- Core Investment Company (ND-SI-CIC). The headquarters are in Bengaluru and Karnataka.

It is a new-age retail bank that primarily focuses on building trust, technology, and transparency. The Fincare products are CASA, Fixed Deposit, Recurring Deposit, NRI Banking, Loan against property, Microloans, Institutional Finance.

Fincare Business Services has 25 branches in four states, i.e., Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh.

How Do MicroFinance Institutes Works?

Microfinance Institutes provide microcredits microloans to the weaker section of society.

The microfinance institutes work based on various funds from the other banks and financial institutes.

The funding from different sources such as;

  • Loans from the other banks
  • Funds are generated from Public Investors and Privater Investors.
  • Funds are raised from members and customer deposits.
  • Microfinance Institutes also raise their funds from Subsidies and Grants.
  • Sometimes the funds are raised from their capital.

Key Highlights

  • Microfinance Institutes- NBFCs have a 24 percent growth yearly (YOY).
  • According to the SIDBI- Equifax newsletter, the market share in Q3 FY19 was 38 percent.
  • At the end of Q3 FY19, the MFIs had active loans of Rs. 8.22 crores. The Gross Loan Portfolio (GLP) was Rs. 1,57,644 crores.
  • Microfinance Institutes spread in 615 districts of India.

Also Read: 20 Best Mutual Funds Companies in India: Long Term Investment

In Conclusion

India’s microfinance industry grew by about 60 percent to stand at Rs.640 billion during the financial year 2016-2017, according to reports published by the Indian government and independent organizations.

This volume is set to increase exponentially as more Indians take to entrepreneurship for various reasons ranging from training provided under the Skills India project and business-friendly policies being implemented in this country.

Startups in India also avail microfinance to seed the business. Consequently, a large number of PSU, private and cooperative banks are planning to acquire NBFCs that offer microfinance.

On the other hand, MFI-NBFCs are applying for banking licenses to open microfinance banks in India.

According to various news reports, several banks and leading  NBFCs are already in talks with MFI companies for mergers and acquisitions. Consequently, the MFI sector of India will witness a boom.

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