The top 15-20 NBFC-MFIs account for about 85 per cent of the portfolio of NBFC-MFIs
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With just 20 days to go for the Union Budget, small and mid-sized NBFC-MFIs (non-banking finance company – microfinance institutions) are hoping that a credit guarantee scheme – mooted by the industry bodies last year for getting banks to re-open the credit tap for them – will become a reality.
It may be pertinent to mention that in August 2025, Sa-Dhan and MFIN, the Self-Regulatory Organisations (SROs) in the MFI sector, had made a pitch to the government, requesting it to put in place a ₹20,000-crore credit guarantee scheme. However, there has been no word so far from the authorities in this regard.
The aforementioned proposal was mooted as banks have turned circumspect in lending to the small and mid-sized NBFC-MFIs in the last couple of years due to multiple factors, including asset quality concerns, liquidity crunch, operational challenges, declining disbursements, and lower client retention.
Recycled lending
Due to the delay in setting up the credit guarantee scheme, the small and medium-sized MFIs are struggling as they are not able to access funding so easily, noted Jiji Mammen, Executive Director & CEO, Sa-Dhan.
“Disbursements from banks to these entities have either stopped or is very limited. Whatever recovery these MFIs make, only that can be recycled for giving fresh loans and repaying the loans taken from banks. So, ultimately, not much lending is happening. That’s the reason the overall MFI loan portfolio has come down. But, now slowly a small reversal is happening,” Mammen said.
Mammen underscored that the larger NBFC-MFIs have started becoming active as raising capital and getting bank loans isn’t an issue for them. The top 15-20 NBFC-MFIs account for about 85 per cent of the portfolio of NBFC-MFIs.
MFIN, in a November 2025 report, observed that it been advocating for the revival of the Credit Guarantee Scheme for MFIs (CGSMFI) and creation of a dedicated financing facility for the sector to address the inherent liquidity problem faced by the NBFC-MFIs.
The outstanding loan portfolio of the microfinance industry (NBFC-MFIs: 94, banks:17, small finance banks:10, NBFCs: 99, and others:65) shrunk by 15.5 per cent year-on-year to ₹3,41,947 crore, as at September-end 2025, per Sa-Dhan’s quarterly microfinance report (July-September 2025).
Published on January 11, 2026
