Microfinance Stocks: Is The Downcycle Over? Credit Demand & Better Discipline Bring Hope

India’s microfinance sector is showing signs of recovery after facing several major challenges, including the pandemic, geopolitical shocks, rising fuel prices and regulatory issues. Asit Bhandarkar, Senior Fund Manager - Equity, JM Financial AMC, explains why the current cycle could be more favourable for the industry. Credit demand remains strong, while competition has reduced after several lenders faced pressure. Improved regulations, technology adoption and stronger systems and processes could also help leading players navigate the next phase. However, questions remain over whether microfinance companies can become long-term wealth creators. Investors will need to track asset quality, spreads, discipline and sustainable growth.