How did MFIs come into existence in India?

Micro finance institutions aren’t new in the Indian financial market. Due to the overwhelming poverty in India, the government gave special attention to the development of rural credit. Taking All India Rural Credit Survey report (1950) into account, the government reconstructed the cooperative structure which included the partnership of state in cooperatives, establishment of Regional Rural Banks (RRB) and National Bank for Agriculture and Rural Development (NABARD).

In India, non-government organisations (NGOs) played a pivotal role in the development of micro financial service. Furthermore, microfinance industry in India has witnessed a fast-paced growth in last two decades. In 2009, the total number of microfinance institutions in India was around 150, which quickly grew to 223 by 2017.

Latest data suggests there are 47 non-bank finance company-micro finance institutions (NBFC-MFIs) registered with Microfinance Institutions Network (MFIN), an industry body, covering 90% of the portfolio.