Muthoot Microfin, a leading microfinance company, has begun disbursing loans through its co-lending partnership with the State Bank of India (SBI), the country’s largest lender. As part of the collaboration, SBI has sanctioned a Rs 500 crore limit for disbursal, to be distributed in increments of Rs 100 crore. Loan amounts range from Rs 50,000 to Rs 3 lakhs and are targeted at eligible customers, particularly members of Joint Liability Groups (JLGs) involved in agriculture, allied activities, and other income-generating projects.
Expanding Access to Affordable Credit
Muthoot Microfin, part of the Muthoot Pappachan Group and popularly known as Muthoot Blue, operates in 20 states and 369 districts across India. This initiative aims to expand its footprint nationwide, enhancing access to affordable credit for rural entrepreneurs. The partnership with SBI facilitates lower interest rates, making loans more accessible to underserved communities and driving financial inclusion.
Sadaf Sayeed, CEO of Muthoot Microfin, emphasized the initiative’s transformative potential, stating:
“Our unique partnership with India’s largest lender, SBI, enables us to deliver affordable credit to women entrepreneurs, helping them grow their businesses and improve their livelihoods. With this collaboration, we aim to meet the growing demand for financial solutions across rural and semi-urban India, creating a sustainable impact and empowering communities through economic self-reliance.”
Key Highlights of the Co-Lending Initiative
- Loan Disbursement and Limits: SBI has approved a Rs 500 crore limit for the program, with loans ranging from Rs 50,000 to Rs 3 lakhs, disbursed in Rs 100 crore tranches.
- Target Beneficiaries: Focus on JLG members engaged in agriculture, allied activities, and other entrepreneurial ventures.
- Geographic Expansion: Muthoot Microfin plans to roll out this initiative nationwide, extending its reach to rural and semi-urban regions.
- Affordable Financing: The collaboration ensures lower interest rates, making loans cost-effective for borrowers.
Industry Standing and Recent Performance
Muthoot Microfin ranks as the fifth-largest NBFC-MFI (Non-Banking Financial Company – Microfinance Institution) in India, specializing in micro-loans for women in rural areas. Despite its strong industry presence, the company reported a 44% decline in net profit for Q2 FY25, falling to Rs 61.6 crore from Rs 110 crore in the same period last year.
The decline in profitability was attributed to higher employee costs, increased provisions for bad loans, and challenges within the microfinance sector. Key financial metrics for Q2 FY25 include:
- Operating Profit: Increased by 26% to Rs 236 crore.
- Provisions for Bad Loans: Rose to Rs 155 crore from Rs 41 crore in the previous year.
- Gross NPA Ratio: Increased to 2.7% from 2.3% year-on-year.
- Employee Costs: Grew to Rs 133 crore from Rs 111 crore.
Driving Economic Self-Reliance
Muthoot Microfin’s collaboration with SBI reflects its commitment to empowering rural entrepreneurs, particularly women, by providing affordable credit solutions. Despite facing short-term challenges, the company remains focused on fostering financial inclusion and driving sustainable growth across India’s rural economy.