Market Trends of Micro Finance Industry
Growing Importance of Digitalization for Traditional Microfinance Institutions
Microfinance facilitates the provision of loans, deposits, and various financial services, empowering aspiring entrepreneurs to initiate or expand their businesses. Microfinance leads to job creation and income generation and fosters economic growth. It is crucial in empowering women, helping them overcome traditional barriers and seize control of their financial futures. Many microfinance programs target women borrowers because they understand their business potential and the power of the multiplier effect. For example, FINCA, a microfinance bank based in Mumbai, India, partnered with the social enterprise CIRCLE (Women’s Economic Empowerment and Leadership). The partnership aims to help women of low-income backgrounds become digitally literate and financially independent through CIRCLE’s digital literacy program (DLP).
Microfinance institutions and microlenders charge high-interest rates on different amounts of money, which is the main obstacle to market growth. Furthermore, the main focus of microfinance institutions is to increase their revenue. As a result, they have short repayment times and high charges. Microfinance institutions borrow large amounts of money from different banks and other institutions. As a result of high interest rates and short repayment times, the market is growing less. Moreover, many microfinance institutions in most countries around the world need to raise capital through private equity because they can't collect savings, as they are allowed by the government, negatively impacting market growth.
The Indian Government, for example, has created various programs of financial aid for both existing and potential Micro, Small, and Medium Enterprises (MSMEs). These programs aim to provide financial aid to budding MSMEs so that they can set up and expand their business to reach their full potential.
Asia-Pacific (APAC) is one of the Fastest Growing Regions in Terms of Market Growth.
Asia-Pacific is the most revenue-generating region for microfinance. China and India account for the region's most significant share of the microfinance market. As a result of the financial institution's involvement in implementing microfinance schemes for loans to poor socio-economic groups, India has a dominant position in the microfinance industry.
Microfinance solutions and services are also helping SMEs increase access to credit and capital, enabling them to invest in growth. Furthermore, the use of peer-to-peer lending and crowdfunding platforms projected to contribute to the growth of the global microfinance market over the next few years is driven by an increasing penetration of internet and mobile devices across Asia-Pacific.
Microfinance solutions & service providers also support small and medium-sized enterprises (SMEs) by improving their access to loans and equity, allowing them to invest in expansion. Furthermore, the growing adoption of the internet and smartphones in the Asia-Pacific (APAC) region is fueling the expansion of peer-to-peer (P2P) lending and crowdfunding. All of these factors are expected to contribute to the global growth of microfinance in the coming years.
