Budget 2025 Expectations: FM may announce special fund to support MFIs

The government may introduce a new fund to provide equity support to the sector in FY26. This is majorly aimed at stimulating the growth of micro-finance sector and increasing the market players in sector. According to reports, ‘small and mid-sized’ microfinance institutions (MFIs) would benefit majorly from this fund, as these are expected to play a crucial role in extending collateral-free credit to low-income households.

In 2013, the Centre had created a India micro-finance equity fund (IMEF), having a corpus of ₹100 Crore under the Small Industries Development Bank of India (SIDBI). Though the purpose of IMEF is to provide equity to smaller MFIs and help them to maintain growth and scaling up.

As per the sources, the new fund would be introduced with much relaxed restrictions. The fund may either be managed by any development financial institution like SIDBI or NABARD. However, sources also indicate that a separate fund may also be created for smooth transmission of funds.

MFIs provide small value loans to underserved populations in the country, along with providing banking services. Presently, India has more than 200 MFIs and about 80% of them are either small or mid-sized category.

In India, MFIs are regulated by the Reserve Bank of India (RBI) through (NBFC-MFIs) framework, introduced in July, 2014. The outstanding combined loan of MFIs stood at around ₹1.7 Lakh Crore as on March 31st, 2024.

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