Crisil expects MFI AUM growth to accelerate to 20% in FY27
A domestic rating agency Crisil in its latest report has said that the assets under management (AUM) of the microfinance institutions (MFIs) are likely to grow 20 per cent in fiscal year 2026-27 (FY27), a sharp acceleration from 4 per cent growth recorded last fiscal. It said the microfinance portfolio is expected to grow 13 per cent, reflecting a gradual recovery after last fiscal’s slowdown. It noted that the growth will primarily be driven by non-microfinance portfolios such as gold loans, lending to micro, small and medium enterprises (MSMEs), loans against property and individual loans.
According to the report, the non-MFI loans AUM, as a part of the overall pie, shot up to 14 per cent in FY26 as MFIs resorted to such segments. It said the segment is expected to rise further to 18 per cent by the end of FY27, with lenders increasingly focusing on secured loan products. It said the core MFI segment is exposed to idiosyncratic risks ranging from localised sociopolitical disruptions to weather-related income shocks, which can drive sharp volatility in borrower repayment behaviour and credit costs. This susceptibility underscores the strategic imperative for microfinanciers to diversify into asset classes beyond microfinance to enhance portfolio resilience and earnings stability.
The agency also observed that MFI lending remained subdued until the third quarter of FY26 due to asset-quality concerns and restricted funding access. However, it said lending activity began recovering in the Q4FY26. It can be recalled that MFIs were forced to adopt a slew of guardrails on maintaining their balance sheet health due to high NPAs traced back to factors including over-leverage among borrowers
