responsAbility Research Insight

Microfinance in India: Renaissance of a sector once said to have no future

Zurich, 16 September 2014 – Following the change of government in India, a new era appears to be dawning in the country. Ensuring access to financial services for the 800 million adults living in India is one of the objectives defined in this context. The government and the Reserve Bank of India are focusing on the potential of the microfinance sector to help realize this objective. After suffering a politically-motivated setback in 2010, the microfinance sector is now thriving again and grew by 35% in 2013 alone. A study by the Swiss asset manager responsAbility Investments examines current developments in India’s financial sector and shows how microfinance institutions are using innovative models to steadily close the massive supply gap.

Microfinance attracts high levels of demand in markets in which conventional financial institutions have failed to serve the needs of low-income sections of the population. This is also the case in India, where the few private banks that exist cater primarily for the country’s middle class, which is still very limited in size. A regulated microfinance market has developed alongside these private banks. Today, it already serves 28 million clients in the lower-income segment and grew its gross loan portfolio by 35% in 2013 (Micrometer, March 2014).

Growth is important in view of the significant need for India to strengthen financial inclusion. Although 35% of India’s adult population has a savings account, only half of these accounts are actually in use. This needs to change according to the Reserve Bank of India: Its goal is that by 1 January 2016, 100% of adult Indians should have an active bank account. 

Microfinance institutions have delivered the best results in terms of promoting financial inclusion among low-income sections of the population. In recognition of this fact, it was announced that for the first time in India’s history, a microfinance institution will be granted a banking license – a clear sign of the importance of microfinance in driving financial sector development.

Investors who wish to invest in the development of the financial sector can now find a host of different investees that are contributing to the development of India’s vast market, including some that have the potential to shape India’s financial sector in the future. As the largest independent investor in the area of microfinance, responsAbility has been investing directly in India through its own funds since 2008. There has been a fourfold increase in this exposure to USD 120 million over the past three years – despite many market commentators having predicted that the Indian financial sector had no future following the Andhra Pradesh crisis of 2010.

For further information about financial sector development, we also recommend the interview 'Microfinance is about financial sector development'.


responsAbility Investments AG 
Ulli Janett, Media Relations
Telephone: +41 44 250 67 15
E-mail: ulli.janett [at]

About responsAbility
responsAbility Investments AG is one of the world’s leading independent asset managers in the field of development investments and offers professionally-managed investment solutions to both private and institutional investors. The funds managed by the company supply debt and equity financing to non-listed firms in emerging economies and developing countries. responsAbility currently has USD 2.5 billion of assets under management that is invested in around 530 companies in more than 90 countries. Its shareholders include a number of reputable institutions in the Swiss financial market as well as its own employees. responsAbility is registered with the Swiss Financial Market Supervisory Authority FINMA.

Founded in 2003, responsAbility currently has USD 2.2 billion of assets under management, which are invested in 500 companies in 90 countries. responsAbility is headquartered in Zurich and has local offices in Paris, Lima, Mumbai and Nairobi. Its shareholders include a broad range of reputable institutions in the Swiss financial market as well as its own employees. responsAbility is registered with the Swiss Financial Market Supervisory Authority FINMA.

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