Authored by: Shailesh Kumar, Head of Credit and Inorganic Business, Arohan Financial Services Limited.

The Mother of all festivities, Diwali is over, but the festive mood continues. Trends suggest that festive sales really boomed this year of 2023, like never before. Estimates from the Confederation of All India Traders show that on Diwali retail markets across India did a record trade of Rs 3.75 lakh crore. Experts have noted that sales jumped during the festive period. This is also attributed to the recent surge in sales having its genesis in pent-up demand especially from deferred purchases. It is also noted that most of the firms not only added newer products and services during this period which spanned from August to November’23, but also noted a paradigm shift in consumer behavior, such as increased spending on consumer durables and home renovation, due to postponed purchases during the pandemic. Influence of social media has also added to the positive frenzy including India hosting the Men’s Cricket world cup and also the G20 summit this year.


Every lender has encashed this opportunity in filling in working capital gaps of the industry. However, over lending cannot be ruled out.

This period has been a boon for microfinance industry as this segment is one of the main supplier of goods starting from earthen pots to ethnic dresses which we all buy during festivals like Diwali. With availability of a large space yet to be fully banked, and Banks and NBFCs trying to recover from impact of the pandemic, the Microfinance industry is witnessing all sorts of lenders vying for some space here owning to the fact that MFI has delivered the minimum credit cost during pre-covid era, and now also offers one of the highest yield due to change in regulations.

The first principal of microfinance in terms of understanding the space is not known to many and hence a large number of lenders are lending to clients who already have high indebtedness. The key to success in MFI lies in doing proper household income assessment, a continuous touch base with the client, utilization of digital technology, thereby minimising operational expenses, offering diverse products, ensuring end use of funds during and after disbursals, analyzing industry data and designing products and policy at state and district levels. It’s prudent not to be overly dependent on any single geography as microfinance inherently is about community lending and any problem emanating from one place may disturb a larger geography. The challenge is coupled with the fact that digital inroads have weakened the traditional centre discipline and hence we have to be doubly guarded in identifying a right lendable client.

Thus, it is safe to say that a well laid out and practiced underwriting process will secure the future of microfinance, amidst the rapidly changing dynamics of the macro economies of the industry, operational scale on an exponentially growing digital world and the shifting goalposts of the microfinance customers.

Shailesh Kumar
(Mr. Kumar is the Head of Credit and Inorganic Business, Arohan Financial Services Limited, an Aavishkaar Group company – views expressed above are personal).