MFIN wants ₹20,000 crore credit guarantee scheme for microfinance
India's microfinance sector is struggling, and the Microfinance Institutions Network (MFIN) wants the government to step in with a ₹20,000 crore credit guarantee scheme.
The plan: cover up to 75% of bank loans to microfinance institutions (MFIs), so banks feel safer lending and millions of low-income borrowers can get much-needed funds again.
45 lakh borrowers have lost access to microfinance
Outstanding loans for MFIs have dropped by about 21% between March 2024 and August 2025, as per MFIN.
Because of this crunch, about 45 lakh borrowers—mostly low-income individuals—have lost access to microfinance.
Banks have pulled back sharply
Banks have pulled back sharply too, slashing their lending to MFIs by over half—from ₹30,018 crore in Q4 FY24 (March 2024) to just ₹13,840 crore in Q4 FY25 (March 2025).
Even though loan quality has improved a bit (with risky loans dropping from 4.6% last September to 3.4% this August), MFIs are now relying more on their own funds.
MFIN points out that similar scheme worked really well
MFIN points out that a similar scheme launched in 2021 worked really well—with full repayment and zero defaults.
They believe "CGSMFI 2.0" could restore liquidity for small and medium MFIs, keep credit affordable, and protect financial inclusion for millions across India.