Microfinance is no more just a tool to eradicate poverty; it has become a crucial catalyst for individual development and growth in entrepreneurial activities in economically under-served areas of the country. All reports on microfinance succinctly suggest that over the last few years MFIs have helped change not just people’s lives but also infused fresh blood into rural communities, and created a sustainable financial eco-system.

Microfinance’s agenda of bringing to light the often neglected and oppressed poor people from villages no more seems a horizon that cannot be touched. Under such circumstances, it is time for MFIs to extend the scope of their operations to stand by small and medium enterprises, an area that has not been paid much attention.

Even though financial inclusion is at the top of the agenda there is still no roadmap as such to provide loans to those who have outgrown amounts above the upper threshold of MFI loans but are still not big enough to avail SME loans from commercial banks. The needs of these enterprises have till date remained unmet by both MFIs and commercial banks. Since such enterprises have the potential to act as major source of employment in villages, besides being significant drivers for economic growth in rural areas, access to financial services for such borrowers could help further a notch the government’s key policy objective.

In India, MFIs are allowed to lend up to 15 percent of their net assets in non-microfinance loans, some MFIs like VFS are working towards providing larger loans to select borrowers, whose businesses show the potential for scaling up. While the government launched the Micro Units Development and Refinance Agency Bank (MUDRA), a public sector financial institution, in April 2015 in a bid to cater to such borrowers, the road is still long and windy. Since all large MFIs report to credit bureaus, it is not hard to prevent multiple lending, in the process helping first-time borrowers to build credit histories.

Although there are still some doubts given that such loans are new, there is a need for studies on lending models and variations in lending patterns by different regions of the country. However, SMEs across the globe have shown promise as strong role-players in national development, primarily owing to the volume of employment they generate. There remains no doubt that catering to financial needs of SME borrowers has considerable potential to stimulate local economies in a more inclusive and dynamic manner.