According to the Market Statsville Group (MSG), the global microfinance market size is expected to grow from USD 217.18 million in 2022 to USD 632.16 million by 2033, growing at a CAGR of 10.2% from 2023 to 2033. The major factors driving the growth of the microfinance include increasing number of microenterprises, government efforts to promote microfinance, and lower interest rates. Microfinance appears to have a promising future as it continues to spread beyond established banks. New entities such as distribution networks and mobile operators will aid in the provision of financial products and services to impoverished and isolated populations at lower rates. New technology, in conjunction with online banks, will aid in the marketing of these large-scale offers. When it comes to rules, they will place a greater emphasis on the client than on institutions, products, or processes. Financial inclusion will become a reality in the next years in most parts of the world that are currently excluded from a variety of financial services such as business loans, personal loans, insurance, and so on. Not only that, but technology advancements will also have a significant impact on the microfinance sector's structure. New technical developments are providing not just a wider range of services, such as insurance, credit, and savings products, but also low-cost payment infrastructure and other services to the needy people.

Definition of the Global Microfinance Market

Microfinance, often known as microcredit, is a type of banking service oriented for low-income or unemployed individuals and groups. The goal is to assist those who do not have access to financial services. Microloans range in size from $100 to $25,000 and are provided by participating banks or financial institutions. Not only that, but many banks also offer ancillary services such as savings accounts, business education, and micro-insurance. The primary goal of microfinance is to provide opportunity for poor individuals to become self-sufficient.

There are various companies and organizations that provide services such as collect payments on a loan, respond to customer service inquiries, and perform other administrative tasks associated with microfinance services. Microfinance draws a significant percentage of its value through connections that benefit the customer rather than being captured and maximized for the financial intermediary's gain. This isn't a new notion, but the current circumstances resulting from COVID will bring it to the forefront because SMEs and startups will certainly face obstacles and will seek strategic alliances such as mergers. The rise in the number of microfinance organizations is driving market expansion by assisting emerging countries in eliminating poverty and improving the standard of living of the poor. Other factors driving microfinance market growth include the move from traditional lending to microfinance, lower operating costs, and less market risk.

COVID-19 Impact on the Global Microfinance Market

The COVID-19 virus is sweeping through the globe, tapping countries, societies, and communities under enormous pressure. The government in all over the world had enforced stringent lockdowns and social distancing norms to control the spread of novel coronavirus, which are now widely acknowledged as the most effective way to combat the pandemic. These crises also put many impediments and affect various industrial sectors across the region. The financing sector is also such a sector that was greatly affected due to the outbreak of COVID-19. However, micro financing enables organizations to modernize their approach, to gain improves operational efficiencies and critical economic benefits, amidst the pandemic. The advent of fintech in the financial sector has offered a new experience to both consumers as well as operators. As per the company source, during the lockdown around 72% rise is projected in the use of fintech apps in the all the region.

Global Microfinance Market Dynamics

Drivers: Switching from traditional lending methods to microfinance

With the increasing penetration of smartphones and internet users worldwide and especially in emerging economies such as Malaysia, online financing has seen significant growth in recent years. Microfinance is considered one of the affordable and widely used options for lenders because it provides instant accessibility for applications and helps improve the living standards of the citizens. This factor will promote the growth of the microfinancing market in the all-region in the upcoming years.

Individuals have started filling out loan applications online in recent years rather than going into the lengthy loan process, which consumes time and is prone to errors. But with the digitalization of the process, loan filling has become user-oriented, time-saving, and efficient, which will regulate the market's growth. According to a report by the industry organization MFIN and KPMG, the arrival of the new Fintech has enabled the microfinance sector to accelerate its transition to a model to serve a larger population at a lower cost. In addition, the ease of applying for loans for borrowers and many other benefits for lenders, such as automated loan processing and fast approval, shift their focus to digital microfinance, thus driving the growth of microfinancing in the all-region during the forecasting period.

Restraints: Reduce repayment time and high returns

Microfinance institutions and micro-credit institutions charge high-interest rates on different loan amounts, which is the primary factor hindering the market's growth, especially in emerging economies such as Malaysia. In addition, microfinance mainly focuses on increasing income, due to which their payback time is short, and expenses are high. As a result, most people don't go for it, that will negatively impact the microfinancing market.

The microfinance institution borrows large sums of money from various banks and other institutions, allowing it to charge high-interest rates and shorter repayment terms, hampering the market's growth. Moreover, various microfinance institutions need to use private equity to raise capital because they cannot raise savings, like traditional microfinance banks, as a means of financing. Loans have a negative impact on market growth, and policies of microfinance institutions are hampering the growth of the market in the region.

Opportunities: Digitalization of Microfinancing process

The increased adoption of digital technology in various fields across the world has increased efficiency and reduced the workload of financial institutions. With the help of cloud storage and various applications for lenders and borrowers, it becomes easy to keep records and track beneficiary details. This will accelerate the growth of the microfinance market in the all-region during the forecast period. Digitization is used in the microfinance sector to create new channels for people and increase their income opportunities, the standard of living, promote women-owned businesses. These factors are driving the market growth in the region.

In addition, increased connectivity nationwide through various social media platforms, online service channels, and technological innovations in various countries in the Asia-Pacific region is expected to provide profitable opportunities for the market growth of microfinance in the coming years in the market. The great penetration of advanced technologies in the microfinance industry, such as mobile banking, ATMs, point-of-sale, registration applications, analytics, AI-driven software, and others, offers future opportunities for the growth of the microfinance market both in Malaysia and in Asia- Pacific during the forecast period.

Scope of the Global Microfinance Market

The study categorizes the microfinance market based on type, and application area at the regional and global levels.

By Type Outlook (Sales, USD Million, 2019-2033)

• Group and Individual Micro Credit
• Leasing
• Insurance
• Others

By Application Outlook (Sales, USD Million, 2019-2033)

• Banks
• Non-Banks

By Region Outlook (Sales, USD Million, 2019-2033)

• North America
  • US
  • Canada
  • Mexico
• Europe
  • Germany
  • Italy
  • France
  • UK
  • Spain
  • Poland
  • Russia
  • The Netherlands
  • Norway
  • Czech Republic
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • South Korea
  • Indonesia
  • Malaysia
  • Thailand
  • Singapore
  • Australia & New Zealand
  • Rest of Asia Pacific
• South America
  • Brazil
  • Argentina
  • Colombia
  • Rest of South America
• The Middle East & Africa
  • Saudi Arabia
  • UAE
  • South Africa
  • Northern Africa
  • Rest of MEA

Group and Individual Micro Credit segment accounts for the largest market share by type

Based on the type, the market is divided into group and individual micro credit, leasing, insurance, and others. Among these, the group and individual micro credit segment in the microfinance market held a majority of the market share of 38.6% in 2022. Group-based lending is most prevalent amongst MFIs targeting the poorer sections of the community. It allows MFIs to reduce transaction costs and, at least in the initial loan cycles, reduce risk through joint-liability and guarantee arrangements within the groups. This, in turn, is expected to foster the growth of the segment. Microfinance or other types of banking services are primarily targeted at jobless or low-income individuals or groups that would otherwise have no other access to financial services, hence augmenting segmentation and considerable market growth throughout the predicted period.

Asia Pacific is expected to witness the largest market share by Region

Based on the regions, the global microfinance market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific, and South America. Asia Pacific is projected to account for the highest market share in 2022. Microfinance institutions, such as peer-to-peer lending, crowdfunding, and invoice trading, are expanding in APAC as a result of the existence of numerous SMEs. In Asian countries, the number of SMEs has expanded dramatically. For instance, China had around 18.07 million SMEs. Similarly, the Ministry of Micro, Small, and Medium Businesses (MSMEs) of India reported that there were 63.3 million (6.33 crore) SMEs in India as of March 2020. The increasing number of SMEs in APAC is driving the demand for micro-financial services for company expansion. Microfinance solutions and service providers assist SMEs by increasing their access to credit and equity, allowing them to engage in growth. Furthermore, rising Internet penetration, along with the widespread usage of smartphones, is pushing individuals in APAC to utilize peer-to-peer lending and crowdfunding sites. This is projected to boost the global microfinance industry further in the approaching years.

Competitive Landscape: Global Microfinance Market

The microfinance market is a significant competitor, and extremely cutthroat in the sector are using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.

Major key players in the global microfinance market are:

• Accion International
• Al Amana Microfinance
• AL Barakah Microfinance Bank
• Annapurna Finance P Ltd.
• Banco do Nordeste do Brasil SA
• Bandhan Bank Ltd.
• Cashpor Micro Credit
• FINCA International Inc.
• Fusion Micro Finance Ltd.
• GENTERA S.A.B. de C.V.
• Grameen Foundation
• IndusInd Bank Ltd.
• Kiva Microfunds
• Kotak Mahindra Bank Ltd.
• Manappuram Finance Ltd.
• Opportunity International
• Pacific Community Ventures
• Pro Mujer Inc.

Key Issues Addressed

• What is the market size by various segmentation of the microfinance by region and its respective countries?
• What are the customer buying behavior, key takeaways, and Porter's 5 forces of the microfinance market?
• What are the key opportunities and trends for manufacturers involved in the microfinance supply chain?
• What are the fundamental dynamics (drivers, restraints, opportunities, and challenges) of the market?
• What and how regulations, schemes, patents, and policies are impacting the growth of the market?
• What are the upcoming technological solutions influencing market trends? How will existing companies adapt to the new change in technology?
• The market player positioning, top winning strategies by years, company product developments, and launches will be?
• How has COVID-19 impacted the demand and sales of microfinance in the global market? Also, the expected BPS drop or rise count of the market and market predicted recovery period.
• Detailed analysis of the competitors and their latest launch, and what are the prominent startups introduced in the target market? Also, detailed company profiling of 25+ leading and prominent companies in the market.