From small loans to big businesses: How rural women are changing India’s microfinance story

Mr. Avinash Kumar, COO, DJT Microfinance, told Business Today in a conversation that rural women’s borrowing has become more “purposeful, diversified and enterprise oriented”. He said women are now using formal credit for a wider range of activities, including retail, food processing, tailoring, livestock, agri-allied activities and other local businesses.

The shift comes as women become more familiar with formal financial services and digital transactions. It also reflects a growing focus on using credit to buy productive assets and build more stable sources of income.

According to SIDBI’s Microfinance Pulse (March 2026), the sector today serves nearly 5.5 crore unique borrowers through about 7.6 crore active loan accounts, with a portfolio outstanding of approximately ₹2.77 lakh crore.

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Why rural women are borrowing differently

The biggest change is not simply in how much women borrow, but in what they do with the money.

More women are using microcredit to start, strengthen or diversify small businesses. These include tailoring units, neighbourhood retail and small trading enterprises, dairy and livestock activities and agri-allied businesses.

For many rural women, such businesses are closely linked to their local communities. They can serve customers nearby and can often be managed from or close to home.

DJT Microfinance is an RBI-registered NBFC-MFI that provides financial services to low-income households, with a focus on helping women become self-employed in rural and underserved areas.

The growing use of smartphones and digital payments is also helping women take part in business transactions more directly. The company’s experience shows that women’s participation is moving beyond simply accessing credit and becoming more connected with local markets.

A first loan can be the start of something bigger

For a woman starting a small business, the first loan may be used for something as basic as buying an asset or stocking up on inventory. If the business grows and the loan is repaid successfully, she may later seek more financing.

This can also help build a formal credit history, which can make it easier to access larger financial opportunities as the business and repayment capacity grow.

However, the increase in borrowing should not simply be measured by whether the loan amount gets bigger.

The response pointed out that repeat borrowing is often linked to a particular stage of a business. A borrower may first need money to buy an asset or basic inventory and later need additional financing to expand or diversify into another income-generating activity.

In other words, the important question is not just whether women are taking bigger loans, but whether the credit they receive matches what their business actually needs and what they can afford to repay.

DJT Microfinance said it would prefer to assess changes in average ticket size and borrowing frequency using borrower-level portfolio data rather than generalising across the sector. Its focus remains on matching the size of the credit with the customer’s repayment capacity and business requirements.

How one loan can change a family’s income

The impact of these loans can extend beyond the business itself.

Kumar shared the case of a woman in rural Bihar who initially took a modest loan to expand her dairy business by purchasing additional cattle. As the business grew and milk production increased, it provided her with a stable monthly income.

She later diversified into fodder cultivation, which helped reduce input costs. She was also able to contribute towards her children’s education and improve her family’s living standards.

He also spoke about a woman in Uttar Pradesh who used credit to set up a tailoring unit. What began as an individual business later grew into a small local operation that provides seasonal employment to other women in her village.

In this case, the benefit of the loan went beyond the borrower’s household income and created additional work opportunities in the community.

Kumar said such cases show how access to credit can help women build economic independence, play a greater role in household decisions and improve their social and financial mobility.

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More borrowing also brings a risk

The growth in microfinance lending comes with an important concern: whether borrowers are taking on more debt than they can repay.

Multiple borrowing and repayment stress have become major concerns for the sector. For lenders, this makes checking a customer’s existing financial commitments important before extending another loan.

At DJT Microfinance, the lending process uses credit bureau information, data-led credit assessment and disciplined underwriting to understand a borrower’s existing obligations and repayment capacity.

The company also stays in touch with customers through its field teams. This helps it understand local economic conditions and a customer’s circumstances, while also encouraging responsible financial behaviour.

Internal monitoring systems and real-time portfolio analysis are used for risk management and credit decisions.

The aim is to make sure that access to credit remains sustainable for the borrower. Kumar said healthy portfolio quality and customer financial well-being ultimately go hand in hand.

The next challenge: helping women grow

The next step for the sector is to help women move from taking a small loan to building a business that can provide a steady income.

Rural women are already playing an important role in micro-entrepreneurship, and their contribution could grow further as access to formal finance, financial awareness and technology improves.

But access to a first loan alone may not be enough.

Women also need to be able to build a formal financial track record, access the right-sized financing as their businesses grow and reach markets more effectively.

Technology can make financial services easier to access, while responsible lending can help ensure that the credit remains within a borrower’s ability to repay.

The larger opportunity, according to the company, is to support a woman’s journey from starting an income-generating activity to building a stable business. As more women build credit histories, use digital payments and diversify their businesses, microfinance could play a larger role in helping them move from self-employment to more stable income.

For rural women, that could mean a small loan is no longer just money to get through the month. It can become the first step towards building a business of their own.