Microfinance firms pivot to secured and individual loans as collections improve

During one outlet BFSI Summit in Mumbai, microfinance executives described a gradual recovery marked by better collection performance and a shift toward diversified products, including secured and individual loans. They noted that the gross loan book has fallen from its earlier high point and is now stabilising, with large and medium-size firms keeping liquidity under control, while smaller players still grapple with funding pressures.

Improved underwriting standards have reduced the share of borrowers with multiple lenders or high debt levels. Regulatory adjustments, such as the 60:40 asset framework, are enabling lenders to expand into property, vehicle and gold loans, which could lower risk and funding costs. Nonetheless, the industry remains vulnerable to climate events, local disruptions and broader economic shocks.