Promoting Financial Inclusion - United Nations Development ...

TABLE 3.6 % of Clients Served by Different
Types of MFIs in India.
FIGURE 3.4 MFI Credit Accounts Compared
with Banks (million accounts).
Legal Type
No. of
MFIs
Active
borrowers
million
NGO 27 3.1 12.0
NBFC 31 21.8 84.2
Section 25
Company
3 0.6 2.3
Co-Operative 5 0.4 1.5
Sample 66 25.9 100.0
%
The Sa-Dhan report 6 which uses data of
266 MFIs estimates the outreach at around
27 million. This indicates that around 200
MFIs in the Sa-Dhan sample have very
small average client base of 3,700 per MFI.
Based on the available data on borrowers
of MFIs, M-CRIL estimates a coverage of
20.7 million unique households assuming a
lending overlap, amongst MFIs, of 30%.
More importantly, with 26.7 million
borrower accounts the size of the MFI
sector now more than matches significant
parts of the Indian financial system in
terms of the number of citizens affected.
This number is nearly 1.5 times the total
number of borrower accounts serviced by
the Regional Rural Banks (as shown by the
information in Figure 3.4) and is 26% of
the total number of small credit accounts
(up to `2 lakh, $4,400) held by the entire
banking sector. If allowed to be seen as
part of the mainstream financial system,
the microfinance sector would have a 21%
share of the total number of small borrower
accounts and a 40% share of all microaccounts
(less than `25,000, $555).
The operations of MFIs are facilitated
by lending to them by banks (MFI-Bank
Linkage Programme, MBLP). The total
amount of bank finance outstanding to
MFIs at the end of March 2010 is estimated
by M-CRIL at `16,000 crore.
6
Sa-Dhan, 2010, A Quick Review, 2010: Financial
Performance of Indian MFIs. Delhi: Sa-Dhan.
While MFI outreach remains a small
proportion of the overall financial system in
terms of portfolio size, it is growing much
faster: bank credit grew by 17.5% during
2008–09 while microfinance portfolios
grew by around 100%. As a result, in terms
of portfolio size as well as clients served it is
becoming an increasingly significant part of
the financial system. As the analysis in Table
3.7 shows, the end-March 2010 portfolio
of the microfinance sector (deflated by the
growth in Consumer Price Index numbers
for Agricultural Labour) is 0.64% of the
total credit outstanding of the banking
system and over 40% of all borrower microaccounts
of value less than `25,000 ($555),
as much as 28% of the credit outstanding of
Regional Rural Banks (RRBs) and nearly
20% of the credit outstanding of the district
cooperative banks (DCCBs). 7
The MFIs, except the cooperatives, are
currently not allowed to provide deposit
services to their clients. The cooperatives
can provide deposit services only to their
members. Similarly MFIs also cannot
7
All banking data from RBI, 2010. Statistical
Tables Related to Banks in India, 2008-09. Mumbai:
Reserve Bank of India.
12 PROMOTING FINANCIAL INCLUSION