The Microfinance industry in India witnessed unprecedented growth over the last few decades. The model had its genesis as a poverty alleviation tool, focused on economic and social upliftment of the marginalised sections through lending of small amounts of money without any collateral to women for income-generating activities.
Over the years, the sector has incorporated several changes in its operating model, including digital interventions across the lending value chain; these have enabled MFIs not only to reach a greater number of clients and thereby grow at a much faster pace, but also to do so in an efficient manner by streamlining processes and reducing turnaround times.

But, in their quest for growth and profitability, the social objective of MFIs—to bring in improvement in the lives of the marginalised sections of the society—seems to have been gradually eroding. Anecdotal evidence suggests that many credulous customers find themselves in the vicious debt trap of having to take another loan to pay off the first, and the cycle continues. In order to achieve both economic and social good, improvements should be made to the Microfinancing system.