Microfinance sector shows signs of recovery after seven quarters of contraction: MFIN

Business To Business, Mumbai, 12^th June, 2026:   India's microfinance sector has begun showing signs of recovery after a prolonged period of stress, according to a report by the Microfinance Industry Network (MFIN).
The report noted that the sector's loan portfolio recorded a quarter-on-quarter (QoQ) increase of more than 3% in Q4 FY2025-26, marking a significant turnaround.
According to MFIN:
"Data for Q4FY26 indicates early signs of recovery in the sector. After seven quarters of portfolio contraction, this quarter witnessed a QoQ uptick of over 3 per cent."
Industry Portfolio Size
As of March 31, 2026, the total microfinance industry portfolio stood at:
₹3,25,174 crore
The increase is notable because it comes after nearly two years of consecutive portfolio contraction.
The rebound suggests:

• Improved lending activity by microfinance institutions.
• Gradual stabilization in borrower repayment behaviour.
• Increased confidence among lenders.
• Recovery in economic activity among low-income households and small borrowers who form the core customer base of the sector.

• Rising borrower stress in certain regions.
• Higher delinquencies and repayment challenges.
• Regulatory adjustments.
• Economic uncertainties affecting rural and semi-urban borrowers.

• Rural households.
• Women borrowers.
• Self-help groups.
• Small entrepreneurs.
• Low-income families with limited access to traditional banking services.

• Maintaining portfolio quality.
• Strengthening collections.
• Responsible lending practices.
• Sustainable growth rather than rapid expansion.