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The micro lending market size is forecast to increase by USD 431.2 million at a CAGR of 27.6% between 2023 and 2028. The market is experiencing significant growth, driven by several key trends and factors. One major trend is the adoption of advanced technology in micro financing, enabling faster and more efficient loan processing and underwriting. This technology includes mobile applications, biometric identification, and artificial intelligence. Another trend is the increasing adoption of micro lending in developing nations, where access to traditional banking services is limited. However, there is still a lack of awareness about financial services in some regions, posing a challenge to market expansion. Additionally, regulatory frameworks and interest rate caps can impact the profitability of micro lending institutions. Overall, the market is poised for continued growth, driven by technological innovation and expanding reach in underserved markets.
Micro lending, a subsegment of microfinancing, refers to the provision of small loans to individuals or small businesses who lack access to traditional banking services. Microfinance institutions (MFIs) and online platforms serve as lenders, offering loans ranging from a few dollars to several thousand. Borrowers, often from economically disadvantaged backgrounds, use these loans for various purposes, including starting small businesses in retail, food services, handicrafts, livestock rearing, transportation, recycling, and health services. Micro lending plays a crucial role in addressing income inequality by providing access to financial services for those excluded from the formal banking sector. Collateral is usually not required for these loans, making them more accessible than traditional loans.
In addition, investors, including venture capital firms and equity financing entities, have shown interest in this sector, recognizing its potential for social impact and financial returns. Traditional banks have been slow to serve this market due to high transaction costs and small loan sizes. As a result, MFIs and online micro lending platforms have emerged as key players, providing loans through digital channels and mobile applications. This shift towards digital platforms has been particularly beneficial during the pandemic, enabling lending to continue despite physical distancing measures.
The market research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD million" for the period 2024-2028, as well as historical data from 2018-2022 for the following segments.
The banks segment is estimated to witness significant growth during the forecast period. Micro lending, a segment of microfinancing, connects lenders with borrowers seeking small loans for various purposes. Microfinance institutions, including banks, micro finance institutes, credit unions, and micro lending platforms, play a crucial role in this market. The loan portfolio of these institutions caters to small businesses, venture capital firms, solo entrepreneurs, and individuals in sectors such as retail business, tech startups, handicrafts, livestock rearing, food services, tailoring, transportation, recycling, health services, and more. Investors, both local and international, are increasingly recognizing the potential of microfinance for financial inclusion, poverty reduction, entrepreneurship, gender empowerment, disaster recovery, and sustainable development. Collateral is often not required for micro loans, making them accessible to a broader population.
In addition, traditional banks, however, may overlook the creditworthiness of potential borrowers due to income inequality. Artificial intelligence and online platforms are transforming the micro lending landscape, streamlining processes, reducing turnaround time, and enhancing financial literacy. Government bodies and non-profit organizations also play a vital role in promoting microfinance and regulating the industry. This sector's growth is essential for fostering economic development and reducing income disparities.
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The banks segment accounted for USD 46.90 million in 2018 and showed a gradual increase during the forecast period.
APAC is estimated to contribute 52% to the growth of the global market during the forecast period. Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.
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Micro lending refers to the provision of small loans to borrowers, often unbanked or underbanked individuals, through microfinancing institutions and platforms. These institutions play a vital role in financial inclusion, poverty reduction, entrepreneurship, and gender empowerment by offering access to credit for small businesses, venture capital for tech startups, and funding for sectors like handicrafts, livestock rearing, food services, tailoring, transportation, recycling, and health services. Microfinance institutions, lenders, credit unions, and banks collaborate to expand the loan portfolio, catering to the needs of solo entrepreneurs and small businesses. Investors, including venture capital firms and equity financing entities, also contribute to the growth of micro lending through collaborations and partnerships.
In addition, artificial intelligence and government bodies are increasingly playing a role in micro lending, enabling more efficient and inclusive lending processes. Traditional banks are also recognizing the importance of microfinance institutions and are partnering with them to expand their reach. Collateral is not always required for micro loans, making them accessible to a broader population. Micro lending platforms have emerged online, providing convenience and accessibility to borrowers. Microfinance has been instrumental in reducing income inequality and promoting sustainable development through disaster recovery and financial literacy initiatives.
Our researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Adoption of advance technology in micro financing is the key driver of the market. The market is experiencing significant growth due to the integration of digital technologies and increasing urbanization. This market plays a pivotal role in creating job opportunities, particularly in developing countries, where it empowers women and small business owners. Natural disasters and rising income inequality have further prioritized the importance of micro lending in providing financial assistance. Fintech companies are leveraging advanced technologies such as big data, machine learning, blockchain, and mobile technology to streamline loan disbursal processes and improve creditworthiness assessment. Regulatory reforms are also facilitating the expansion of this market, enabling the use of credit scoring systems and risk management tools for underwriting.
In addition, these advancements are transforming the micro lending landscape, making it more accessible and efficient for self-employed individuals and small enterprises. The widespread use of smartphones and internet connectivity is further enhancing the market's reach and impact, contributing to social good and social impact investment.
Rise in adoption of micro lending in developing nations is the upcoming trend in the market. Micro lending plays a pivotal role in creating job opportunities and empowering individuals, particularly women, in developing countries across Asia Pacific, South America, and the Middle East. Government initiatives and the emergence of numerous fintech companies have fueled the growth of The market. In the face of rising income inequality and urbanization, micro lending provides essential financial assistance to small business owners, self-employed individuals, and micro and small enterprises. Natural disasters and other unforeseen circumstances often hinder progress, making access to quick and flexible credit essential. Advanced technologies such as mobile technology, internet connectivity, big data, machine learning, blockchain, and credit scoring systems enable efficient risk management, underwriting, and loan disbursal processes.
In addition, micro lending not only contributes to social impact investment and social good but also helps individuals and communities rise above adversity and improve their standard of living.
Lack of awareness about financial services is a key challenge affecting the market growth. Microfinance Institutions (MFIs) play a crucial role in providing financial services to low-income groups, particularly in developing countries where job opportunities are limited due to natural disasters, urbanization, and rising income inequality. Women are a significant beneficiary of these services, as micro lending empowers them to start small businesses and become self-employed. However, MFIs face challenges in expanding their reach, with lack of awareness about financial services being a major issue. Many potential customers have a limited understanding of micro lending processes, while MFI representatives may lack knowledge of regulatory reforms. Fintech companies are addressing these challenges through the use of mobile technology, internet connectivity, big data, machine learning, blockchain, and credit scoring systems to assess creditworthiness and streamline loan disbursal processes.
In addition, these advancements aim to improve risk management and underwriting, making micro lending more accessible to small business owners and micro and small enterprises. Despite these efforts, the lack of awareness among the population remains a significant hurdle to the growth of the market.
The market forecasting report includes the adoption lifecycle of the market, covering from the innovator's stage to the laggard's stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.
Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Accion International - The company offers solutions for micro lending where low-interest loans are provided to low-income individuals and groups.
The market research and growth report includes detailed analyses of the competitive landscape of the market and information about key companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
Micro lending, a segment of microfinancing, plays a crucial role in providing small loans to borrowers, particularly those excluded from traditional banking systems. Microfinance institutions, credit unions, and even solo entrepreneurs serve as lenders, offering loan portfolios to small businesses, venture capital firms, and individuals. Collateral is often not required, making it an accessible financing option for those who may not qualify for traditional loans. Microfinance institutions use various channels to reach borrowers, including online platforms and government bodies. Small businesses in retail, tech startups, handicrafts, livestock rearing, food services, tailoring, transportation, recycling, health services, and other sectors benefit from micro lending.
Furthermore, financial inclusion, poverty reduction, entrepreneurship, gender empowerment, disaster recovery, and sustainable development are some of the key areas where micro lending contributes significantly. Income inequality is a significant challenge for many borrowers, making micro lending an essential tool for bridging the gap. Artificial intelligence and technology are increasingly being used to streamline the lending process, making it more efficient and accessible. Banks and financial institutions are also recognizing the importance of microfinance and are partnering with microfinance institutions to expand their reach. Micro lending platforms have gained popularity in recent years, offering investors an opportunity to invest in microfinance institutions and earn returns while contributing to financial inclusion and poverty reduction. Venture capital firms and equity financing are also exploring opportunities in the microfinance sector. The sector's growth is driven by the need for financial literacy and the desire to support small businesses and entrepreneurs in various sectors.
Market Scope |
|
Report Coverage |
Details |
Page number |
135 |
Base year |
2023 |
Historic period |
2018-2022 |
Forecast period |
2024-2028 |
Growth momentum & CAGR |
Accelerate at a CAGR of 27.6% |
Market growth 2024-2028 |
USD 431.2 million |
Market structure |
Fragmented |
YoY growth 2023-2024(%) |
20.0 |
Regional analysis |
APAC, Europe, North America, Middle East and Africa, and South America |
Performing market contribution |
APAC at 52% |
Key countries |
China, US, Germany, India, and South Korea |
Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
Accion International, Bajaj Finserv Ltd., Bluevine Inc., ESAF Small Finance Bank, Fincare Small Finance Bank Ltd., Fusion Micro Finance Ltd., HDB Financial Services Ltd., ICICI Bank Ltd., Kiva Microfunds, Larsen and Toubro Ltd., Lendio Inc., Lendr.Online LLC, Oakam Ltd., On Deck Capital Inc., Panamax Inc., Small Industries Development Bank of India, and Ujjivan Small Finance Bank Ltd. |
Market dynamics |
Parent market analysis, market growth inducers and obstacles, market forecast, fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, market condition analysis for the forecast period |
Customization purview |
If our market report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Source
7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Opportunity/Restraints
10 Competitive Landscape
11 Competitive Analysis
12 Appendix
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