The Indian micro finance industry (MFI) would cross 11 crore borrowers and Rs 135,000 crore ($30 billion) in loan portfolio by 2014 and will require a huge capital inflow both in debt and equity, according to a latest report by Intellecap.

The report said that the growth is expected to come from underserved states that are witnessing a flurry of activity, and also from a range of new financial and non-financial products that are being introduced in the sector.

The third edition of Intellecap’s annual publication on the Indian microfinance sector titled Indian Microfinance: Coming of Age, draws data from 29 MFIs that constitute 80 per cent of the market by portfolio outstanding.

Indian microfinance institutions have grown at a spectacular rate between 2004 and 2009, with an average size portfolio increasing 107 per cent on a year on year basis, while number of clients increasing 91 per cent. As of 2009, the industry had a client base of about two crore and gross loan portfolio of Rs 11,734 crore.

Meanwhile, the report noted that despite a sustained high growth rate in the industry, the full potential of microfinance has not been fully explored in geographies such as Uttar Pradesh, Bihar and north-eastern states. The microfinance penetration in India is merely 3.6 per cent, and 60 per cent of the portfolio is concentrated in the southern states of Andhra Pradesh, Tamil Nadu and Karnataka.

Intellecap also said while access to capital remains a constraint for most Indian MFIs, the market has matured in the past few years.

“Hedge funds, high net worth individuals and blue chip private equity players have entered the market amongst others, and public sector banks have increased their exposure contributing a fourth of the debt capital needs of the sector,” it added.

sanjayvijay@mydigitalfc.com