91% of Microfinance Loans Used for Income Generation: Report The top five states for microfinancing continued to be Bihar, Tamil Nadu, Uttar Pradesh, West Bengal and Karnataka.
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A majority of microfinance loans in India are being utilised for income generation, according to the Bharat Microfinance Report 2025 released by Sa-Dhan in partnership with NABARD.
The report highlights that 91 percent of loans disbursed by Micro Lending Institutions (MLIs) were directed towards income-generating activities, reinforcing the sector's role in promoting financial inclusion and livelihood development.
At the end of FY2024-25, the total active client base of the microfinance sector stood at 8.28 crore, with a loan outstanding of INR 3,81,225 crore, based on data from Credit Information Companies. This includes information from Banks, Small Finance Banks, Non-Banking Financial Companies, NBFC-MFIs, and other lenders. Compared to the previous year, both the client base and loan outstanding declined by 13 percent and 14 percent respectively.
In contrast, the Self-Help Group Bank linkage program showed growth, with the overall outstanding reaching INR 3.04 lakh crore for 84.94 lakh SHGs credit-linked, according to NABARD. Savings-linked SHGs totaled 143.3 lakh, covering 17.1 crore households.
The report also notes 13.99 crore loan accounts as of March 31, 2025. NBFC-MFIs accounted for INR 1,48,419 crore of loan outstanding, Banks INR 1,24,431 crore, SFBs INR 59,817 crore, NBFCs INR 45,042 crore, and other lenders INR 3,516 crore. In terms of accounts, NBFC-MFIs held 539 lakh, Banks 466 lakh, SFBs 216 lakh, NBFCs 163 lakh, and others 15 lakh.
MLIs are serving over 6.27 crore active micro clients, with a total loan outstanding of INR 2,38,198 crore. The managed portfolio of INR 72,930 crore is largely supported by Business Correspondents, contributing INR 53,287 crore. The average loan per borrower was INR 38,005.
The sector remains labor-intensive with 3.29 lakh personnel employed across 37,380 branches, of which 64 percent are field staff and 9 percent are women. The average number of active borrowers per credit officer declined to 299, allowing for more focused service delivery despite higher operational costs.
Shaji KV, Chairman of NABARD, said, "Microfinance has emerged as a cornerstone of India's socio-economic transformation, fostering financial inclusion and empowering women, small and marginal farmers, artisans, and other vulnerable communities."
Jiji Mammen, Executive Director and CEO of Sa-Dhan, added, "Guardrails issued in 2024 and 2025 brought controls in lending and contributed to the sector's negative growth, but 91 percent of loans are being used for income generation, which is a positive sign for recovery."
The report underlines that NBFCs and NBFC-MFIs together contribute to 86 percent of the total client base and 84 percent of the outstanding portfolio. Top microfinance states remain Bihar, Tamil Nadu, Uttar Pradesh, West Bengal, and Karnataka.
