Small Loans, Big Impacts: Microfinance Pathway to SDGs, Climate Change and Energy Transitions

The concept of microfinance, pioneered by Professor Muhammad Yunus and SEWABank in India, has evolved into a powerful tool for financial inclusion, bridging gaps between economic growth, environmental sustainability and energy transitions. With two primary delivery models i.e., Self-Help Group Bank Linkage Programme (SBLP) and Microfinance Institutions (MFIs), microfinance has significantly impacted rural livelihoods, particularly among women. Strengthened by government schemes like DAY-NRLM, DAY-NULM and e-shakti (digitalization of SHGs), microfinance institutions in India have reached an all-time high of 53 million clients with a gross loan portfolio of ₹1,79,855 crores. It utilized government reports (e.g., MoSPI Annual Reports, Periodic Labor Force Survey, Sa-Dhan Microfinance Annual Reports from 2007-08 to 2022-2023), academic literature (peer-reviewed articles, research papers, case studies) and institutional data (reports from microfinance institutions, SHGs, NGOs). Through regression analysis, the study identified links between SHGs credit-linked, loan disbursement, loan outstanding, NPAs and NPA percentage to loan outstanding. CAGR analysis provides a region-wise overview of JLGs promotion and loan disbursement. The analysis of MFIs covered client numbers and loan portfolios, while trend analysis tracked regional changes in microfinance outreach, loan disbursement and repayment rates. the number of SHGs credit-linked surged to 42.96 lakhs from 12.28 lakhs in 2007-2008, marking a 17.07 per cent increase from the previous year. Bank loan disbursements saw a sharp 45.59 per cent growth, reaching ₹145 crores, up from ₹999 crores the previous year. Loans disbursed to SHGs and outstanding loans show a strong correlation (0.991), while decreasing NPAs signal a healthier economy. By analysing data using CAGR, the northern region leads in JLGs promotion with 54.71 per cent growth, followed by the western region at 52.46 per cent, while the north eastern region lags at 21.05 per cent. In loan disbursements, the eastern region tops with 68.15 per cent, followed by the northern region at 64.6 per cent and the north eastern region at 31.1 per cent.