why urban microfinance

The Indian microfinance industry has emerged as one of the world’s most dynamic and rapidly growing markets. India, home to a third of the world’s poor, has the single largest market in the global microfinance sector, with approximately 120 million homes lacking access to formal financial services. Although Indian microfinance institutions (MFIs) currently reach 15 million borrowers, total demand is estimated at over 90 million poor.1

According to the UN’s 2008-2009 World Habitat Report, the 21st century is the urban century, with over half of the global population living in cities. India has over 80 million urban residents, more than half of whom (or 30% of the country’s entire population) currently reside in slums. This figure is projected to reach 40% by 2021.2 As India’s increasing urbanisation leads to the growth of informal slum populations, the demand for formal financial services among these populations will increase.

Much of India’s microfinance activity has been disproportionately concentrated among rural microfinance providers operating in the South. A 2009 study by The Bharat Microfinance Report reveals that penetration of the industry’s target group remains particularly low in large cities, which have only 10% market penetration as compared to 36% in less-populated areas. Urban India has a robust banking infrastructure; however, low-income households, lacking sufficient documentation and unable to provide collateral, face hurdles in accessing it. By serving clients who are excluded from the formal financial system, MFIs can address the gap between formal sources of finance and the urban poor. Moreover, MFIs can take advantage of the existing financial infrastructure in urban areas to connect clients to banks and thereby offer them a more comprehensive package of financial services.

Swadhaar, recognising the particular need to increase the urban poor’s access to financial products, focuses on bridging this gap by providing innovative, efficient and transparent financial services to economically vulnerable urban households. Through straightforward and context-specific products and services, Swadhaar strives to meet its clients’ diverse needs and help financial inclusion become a sustainable reality for India’s urban poor.