Why microfinance is gaining popularity in Manipur

The microfinance market in Manipur is making a boom and the state has been witnessing an increase in the number of micro finance companies in recent years.

ByB Rakesh Sharma

Updated 14 Feb 2021, 2:09 pm

(Photo: IFP)
(Photo: IFP)

Only four microfinance companies have the Reserve Bank of India (RBI) permission to function in Manipur. The microfinance market in Manipur, however, is making a boom and the state has been witnessing an increase in the number of micro finance companies in recent years.

“Only four microfinance companies have the Reserve Bank of India (RBI) permission to function in Manipur. And, none of the micro finance companies in the state has the RBI permission to accept deposits from the public," general manager and officer-in-charge, RBI, Imphal, Mary L Gwite said at the inaugural of the Financial Literacy Week, 2021 on Monday at the RBI, Imphal branch office.

It may be pointed out that as per the Reserve Bank public policy, only banks are allowed to accept public deposits.

However, the microfinance market in the state is growing following the demand and popularity it has gained in the last few years.

Majority of the investors in the state choose microfinance over nationalised banks as the rate of interest is much higher compared to government banks. In the loan section, people opt for microfinance companies as they provide easy loans though interest rates are high.

The main reason of microfinance companies booming in the state, leaving nationalised banks behind, is because of easy accessibility, high interest rate, not having to disclose the source of fund and evading from paying tax, an investor, who declined to be named, said to the Imphal Free Press.

“However, investing in a microfinance company is just like gambling,” stating this, the investor cited the problem faced by the investors of SMART Society run by the Salai Holdings Private Ltd.


Considering the several problems faced by financial investors in the state, Gwite suggested the public to avail credit only from formal institutions such as banks and registered finance companies which are regulated by RBI.

“This will ensure proper grievance redressal in case of non-adherence to fair practice,” Gwite said.

Financial education will help in developing the skills and confidence and to make the investors more aware of financial risks and opportunities to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being, the GM said.

To create financial awareness and educate the public, Gwite said efforts are made to incorporate financial education in the school curriculum of the state board.

The RBI and the state government has taken up steps for introducing financial education workbooks in the text books of English and Social Science for Class VI from the academic session 2021-22, she said.  

Moreover, RBI is actively engaged in introducing the workbooks in the school curriculum from class VI to class X. As per the RBI data scheduled, commercial banks credit as a per cent of GDP came down to 50.99 per cent in financial year 2018-20 from 51.51 per cent in 2018-19 marginally, Gwite said.

“However, this was expected in the light of the pandemic. It is heartening to note that economic activity has picked up in India, with a large section of population in the working age group. India is already the third-largest economy in the world in terms of purchasing power parity and is aiming to become a five trillion-dollar economy,” she added.

In the context of Manipur, Institutional Finance director Anna Arambam said a lot of borrowing still takes place from private lenders, who charge exorbitant interest rates.


Despite the high interest rates, borrowers are willing to pay the higher rates rather than go through the extremely cumbersome process of getting a loan from formal financial institutions, especially from banks, she said.

Anna asserted that nowadays, other financial entities have made availing loans easier. However, these loans are limited as most of them can lend only to its members under the prevailing guidelines or rules.

In this backdrop, it becomes relevant that the general public is given more awareness about the benefits of availing credit from formal financial institutions. It is also important that the benefits of developing credit discipline are disseminated simultaneously to individuals, businesses, SMES and others, she added.

As banks are now increasingly relying on external credit ratings for making lending decisions, credit discipline is an important factor considered while assessing the ability or intention of the borrower to honour debt obligations in a timely manner, the director said.

“It is also hoped that the main factor leading to people approaching private lenders is looked into by the banks, and the process of providing loans is made as simple as possible without compromising on the basic prudence that is required,” she said

RBI has been conducting financial literacy week every year since 2016 to propagate financial awareness knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing among the public.

This year, the theme for the financial literacy week is “Credit Discipline and Credit from Formal Institutions” which is one of the strategic objectives of the National Strategy for Financial Education (2020-25).


First published:8 Feb 2021, 2:16 pm


financial literacymicrofinance market in ManipurMicrofinance

B Rakesh Sharma

B Rakesh Sharma

Staff Reporter, Imphal


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