Operational Challenges Threaten Microfinance Stability

Conducive regulatory reforms have fueled the expansion of India's microfinance sector, but operational inefficiencies are threatening asset quality and the stability of microfinance practice. Rising loan sizes and deteriorating underwriting standards are key operational challenges, leading to borrower over-leverage and increasing credit risks. To ensure sustainable growth, MFIs must strengthen risk assessment frameworks, improve borrower onboarding processes, and enhance staff training to mitigate these risks.