Understanding How Indian Microfinance Institutions (MFIs) Work?

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When it comes to loans, people who use banking facilities can easily apply for a bank loan. However, loans in India are also provided to people who do not have any banking facilities. Microfinance Institutions (MFIs) in India are those companies that lend small loans to people. The amount of a microloan can differ according to the country. In India, all loans below INR 1 lakh are considered to be microloans. Young enthusiasts that want to build a career in banking should know about the microfinancing scenario in India. Read on to know more about MFIs in India. 

Goals of MFIs

Microfinancing is an important concept in investment banking. You should know about microfinancing to secure a better job deal in the investment banking sector. Before understanding the working of MFIs, you should know about their goals. The objectives of MFIs in India are as follows:  

  • An MFI aims to become a financial institution that assists the growth of sustainable businesses and communities. 
  • MFIs help the weaker sections of society by providing the required resources. MFIs have a huge contribution when it comes to the development of women from weaker backgrounds. MFIs have successfully created income generation opportunities for women in India. 
  • Some of the top MFIs in India have contributed to decreasing poverty in the country. MFIs always work on faster and new ways to eradicate poverty. 
  • An MFI will create self-employment opportunities for people that can’t access the available amenities. 
  • MFIs also teach rural people beneficial skills that can help in creating income opportunities. 

As per the records of the World Bank, there are around 1.7 billion people around the world that don’t have access to banking services. These people are the target audience of an MFI. MFIs have had a major role in boosting the economy of the nation. It is why financial institutions expect their employees to know about MFIs. 

How do MFIs work?

MFIs form several groups for distributing small loans, resources, and training facilities to people. Several groups formed by MFIs that help them in functioning are as follows: 

  • MFIs form a JLG (Joint Liability Group) for distributing small loans to a group of 5 -10 people. The small loans are distributed against the mutual guarantee of each member. Every member of the group is responsible for the repayment of the loan amount. 
  • MFIs help in forming an SHG (Self Help Group). An SHG is a group of people with similar economic and social backgrounds. A non-profit organisation is formed between the people and money is collected from each individual. The money is then distributed to members according to their needs. 
  • MFIs are also involved in making loans more accessible for people from rural areas. MFIs always search for ways to provide small loans to people without any collateral. 

How to learn more about MFIs in India? 

If you want to learn investment banking then learn about all its aspects. Microfinancing is important for financial institutions that want to be recognised as a people’s bank. You can go for detailed investment banker courses offered by EdTech platforms. Imarticus Learning is a reliable source that can help you know more about MFIs and other investment banking concepts. The Certified Investment Banking Operations Professional course offered by Imarticus comes with a job assurance guarantee. You can gain industry certifications and learn with an industry-endorsed curriculum. 


Online training from a reliable source like Imarticus can help you kickstart your career as an investment banker. Imarticus will provide tips and training for investment banking interviews. It will also offer investment banking case studies for a better learning curve. Choose an online course to know more about MFIs!

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