Microfinance needs reform more than credit backstops if India wants to avert another crisis in this sector

As per SIDBI’s MFI Pulse Report, at the peak of the recent cycle (March 2024), microfinance lending was distributed across five institutional categories: universal banks (31.4%), small finance banks (16.2%), NBFC-MFIs (41.1%), NBFCs (11.1%) and non-profit MFIs (0.1%). By December 2025, the shares had shifted to 24.3%, 14.7%, 43.5%, 15.9% and 1.5%, respectively.