Microfinance institutions (MFIs), which are playing a key role in providing credit to the poor, particularly women SHGs, have increased their clients from 4.2 million to 9.9 million in the last decade (2013-2022), and registered a growth of 132%.
According to the report, ‘Microfinance in Karnataka’ commissioned by Association of Karnataka Microfinance Institutions (AKMI), while MFIs loans have created a positive impact in the lives of more than 60% of clients in Karnataka, close to 90% of borrowers of MFIs utilised loans for income generating activities. Also, borrowers preferred loans from MFIs over nationalised banks owing to easy documentation.
The report which was released here on Tuesday noted that the average loan per client in Karnataka was ₹44,036 against ₹40,547 in Tamil Nadu. The All-India average was ₹42,838 per client.
T.N. on top of list
Tamil Nadu topped the list in the MFI portfolio with disbursement of ₹34,955 crore while Karnataka secured 4th rank by releasing ₹23,182 crore in 2022. Karnataka accounted for 8.3% of all accounts in India and 8% of clients in the sector. The SHG movement flourished in Karnataka owing to initiatives taken up by MYRADA and Shri Kshetra Dharmasthala Rural Development Project (SKDRDP) from the early 1990s, N. Srinivasan, author of the report, noted.
Loans of MFI constituted 2.3% of the total bank credit in Karnataka in 2013 increased to 4.9% in 2022, average annual growth rate of 16%.
The coverage of urban and rural areas under microfinance in Karnataka has been almost even, with 49.4% of portfolio in urban areas and 50.6% of portfolio in rural areas.
The top five districts in terms of loan accounts had 23% of the State population but had 31% loan accounts. Top five districts by loan accounts are: Mysuru, Belagavi, Tumakuru, Mandya, and Hassan. These five districts have 28.55 lakh loan accounts.
SKDRDP, headed by Dharmadhikari D. Veerendra Heggade, has invested about ₹25,190 crore in more than two dozen community development projects, it said, and noted success stories of various SHGs in different districts of the State.
A study of seven districts — Chamarajanagar, Kalaburagi, Kolar, Mysuru, Udupi, Belagavi, Raichur — covering sample size of 2,300 customers in each district, revealed that 90% of the borrowers utilized loans for income generating activities while 79% of the loan tenure was upto two years. The loan tenure duration was in sync with current loan sizes wherein 79% of the loans are above ₹30,000.
It noted that 89% of the borrowers preferred loans from MFIs owing to ease of documentation, collateral free nature, service quality and good behaviour of personnel of MFIs.
Impact on livelihoods
Within the farm sector, 63% of the borrowers in a sample study stated that they were able to increase the farm output with the support of microfinance, while 60% have said their business volume has increased. About 58% of respondents said their business assets have increased while 60% of them said total workers employed in business have increased.
Progress of microfinance in top 5 States
State Portfolio in FY 2022
Tamil Nadu: ₹34,955 crore
Bihar: ₹34,579 crore
West Bengal: ₹28,804 crore
Karnataka: ₹23,182 crore
Uttar Pradesh: ₹22,773 crore
Top five districts in Karnataka by loan accounts
Mysuru: 8,07,496
Belagavi: 6,68,834
Tumakuru: 5,00,615
Mandya: 4,72,378
Hassan: 4,05,979
