The Global Micro Lending Market size is expected to reach $65.4 billion by 2028, rising at a market growth of 12.8% CAGR during the forecast period.
The process of giving small loans, or microloans, to proprietors of small businesses is known as micro lending. These small business owners, many of whom are located in developing nations, may not have access to conventional banking services or institutions. Instead, to meet their financial needs, these small enterprises use unconventional loan service channels.
These loans are given by lenders to companies and people to help them manage their expenses. Micro lending is used mainly for two purposes. The first is to provide startup assistance to small firms. This happens as there is frequently no physical financial institution in the region in such circumstances. Lenders are private individuals who promise to lend a specific sum of money to a deserving businessperson abroad.
Micro lending is managed for these humanitarian goals by organizations. In addition to presenting a business plan covering daily operations, borrowers will outline the kind of business they intend to launch and how it will function. Borrowers frequently include a personal essay and a concise biography. The second objective is to lend to those who might have poor credit and are unable to get credit from the bank or who are looking to borrow small sums of funds that are less than what a bank would consider acceptable.
There are a variety of reasons why a borrower could need money, all of which are disclosed to prospective lenders. If the creditor does not have confidence in the borrower, they may decide not to finance that specific loan. Due to a lack of interest from lenders, loans may occasionally not be fully funded. These businesses commonly make money by charging origination and maintenance fees for loans, which are subsequently applied to the interest rate of borrowers.
COVID-19 Impact Analysis
The pandemic caused by COVID-19 had a negative influence on the industry. In the early stages of the COVID-19 pandemic, many small and medium-sized firms went out of business, which affected the micro lending service providers. On the other hand, a number of government agencies, sometimes in conjunction with private microlenders, started giving out microloans to small firms. The primary goal of this effort was to provide assistance to businesses in their fight against the pandemic. The COVID-19 pandemic was also responsible for an increase in the amount of money invested in businesses that provide micro lending services.
Market Growth Factors
Increase In The Use Of Micro Lending In Less Developed Countries For The Purpose Of Lifestyle Improvement
Microfinance, also known as micro lending, is a form of financial assistance that is altering the way of life for a variety of individuals in emerging nations by providing them with money. The expansion of the micro lending sector is also being driven by an elevation in the number of government programs that facilitate micro lending in a variety of countries. In addition, an increase in the number of microlenders assists many developing nations in their efforts to reduce poverty and also enhances the living standard of those individuals who are economically disadvantaged.
Utilization Of Recent Technological Developments In Microfinancing
The rise of micro lending is fueled in part by an increase in the rate at which the microfinance industry is embracing digital technologies. This is done in order to open up new distribution channels for customers and expand the scope of potential profits. Furthermore, the widespread adoption of innovative technologies in the microfinance industry in emerging countries, like mobile banking, automated teller machines, point-of-sale terminals, and others, is creating future opportunities for businesses.
Market Restraining Factors
Micro Lending Loans With Smaller Sums And Shorter Maturities
In general, but not always, alternative business finance offers higher rates, shorter credit terms, and smaller loan amounts. Many microlenders work with entrepreneurs who wouldn’t have been authorized for a bank loan, albeit it varies depending on the type of loan they are eligible for. This suggests that the amount of finance they are qualified for is often lower, with a shorter time of payback. Business owners consequently have less money and time to spend the extra money.
Service Provider Outlook
Based on Service Provider, the market is segmented into Banks and Micro Finance Institutes (MFIs). The bank segment garnered the highest revenue share in the micro lending market in 2021. The expansion can be attributed to the expanding partnerships that banks are forming with various other micro lending service providers to assist a variety of proprietors of small businesses and other types of organizations. For example, HSBC India and the Asian Development Bank entered into an agreement with the intention of launching a partial guarantee program with a budget of one hundred million US dollars.
End User Outlook
On the basis of end user, the micro lending market is divided into solo entrepreneurs & individuals and micro, small & medium enterprises. The solo entrepreneurs & individuals segment procured a substantial revenue share in the micro lending market in 2021. The expansion of this segment is being fueled in large part by the numerous programs that have been started by organizations that are not-for-profit specifically for social and women entrepreneurs.
Based on region, the micro lending market in analyzed across North America, Europe, Asia Pacific, and LAMEA. The Asia Pacific segment recorded the maximum revenue share in the micro lending market in 2021. The expansion of businesses throughout the region is responsible for the recent population boom and economic growth. As per the Startup India Hub, for example, India is one of the leading startup ecosystems in the world.
The market research report covers the analysis of key stake holders of the market. Key companies profiled in the report include Funding Circle Limited (Funding Circle Holdings plc), On Deck Capital, Inc. (Enova International, Inc.), American Express Kabbage Inc. (American Express Company), LendingClub Bank (LendingClub Corporation), Zopa Bank Limited, Biz2Credit, Inc., Lendio, Inc., Bluevine Capital, Inc., Fundera, Inc. (NerdWallet), and StreetShares, Inc.
Strategies Deployed in Micro Lending Market
2022-Sep: Biz2X partnered with Network Private Limited, a leading service provider. Under this partnership, the companies focused on offering financial assistance and solutions to B2B MSMEs and SMEs through the Maadhyam platform. The offerings on the platform included loan servicing accompanied by facilities such as invoice-based financing, and line of credit, and proceeded to undertake repayment, credit monitoring, and management of collections of financial products digitally.
2022-Sep: Funding Circle partnered with Affinity Plus Federal Credit Union, a Minnesota-based credit union. With this partnership, the companies focused on offering small organizations and businesses credit access across all communities in Minnesota. The partnership allowed Affinity to buy loans originating via Funding Circle’s global technology and machine learning platform.
2022-Aug: Funding Circle partnered with Farm Bureau Bank, a financial organization that serves Farm Bureau’s members. Following this partnership, the companies aimed to offer capital to SBA owners throughout the country, including those engaged in agriculture. The partnership allowed Farm Bureau Bank to buy loans that originated through Funding Circle, and also increased growth opportunities for the company.
2022-Feb: Lendio introduced a loan origination software (LOS) and a lender-tech platform. The platform is based on the cloud and offers financial institutions greater speed, reduced risk, and efficiency while providing seamless and customer-centric engagement for borrowers.
2021-Jan: Biz2Credit partnered with Fountainhead, a non-banking direct commercial lending firm. Through this partnership, Biz2Credit aimed to offer its Biz2X Accelerate SBA platform to Fountainhead to process loan applications for all programs providing lending to SBAs. The platform also provided services for the Paycheck Protection Program’s second round. Fountainhead implemented Biz2X as its forgiveness and lending platform, which streamlined the processes for managing first and second draw PPP loans.
2020-Jun: Lendio partnered with Lendistry, an online lender. With this partnership, Lendio focused on providing seamless loan and application matching for owners of businesses who have experienced challenges while looking for access to funding. Additionally, Lendistry aims to provide progressive growth and economic opportunities for business owners who are in underserved and in minority communities.
2019-May: Biz2Credit unveiled Biz2X, a turnkey SaaS platform that allows financial institutions to offer a configurable online lending experience for businesses of small and midsize. The platform also helps banks to operate their lending operations and initiatives by offering loan management, risk analytics, servicing, and a customizable user journey.
2019-Apr: LendingClub collaborated with Funding Circle, a leading SBA loan platform, and Opportunity Fund, a leading nonprofit SBA lender. With this collaboration, the companies focused on significantly increasing SBA owners’ access to responsible, transparent, and affordable credit.
Scope of the Study
Market Segments covered in the Report:
By Service Provider
• Micro Finance Institutes (MFIs)
By End User
• Micro, Small & Medium Enterprises
• Solo Entrepreneurs & Individuals
• North America
o Rest of North America
o Rest of Europe
• Asia Pacific
o South Korea
o Rest of Asia Pacific
o Saudi Arabia
o South Africa
o Rest of LAMEA
• Funding Circle Limited (Funding Circle Holdings plc)
• On Deck Capital, Inc. (Enova International, Inc.)
• American Express Kabbage Inc. (American Express Company)
• LendingClub Bank (LendingClub Corporation)
• Zopa Bank Limited
• Biz2Credit, Inc.
• Lendio, Inc.
• Bluevine Capital, Inc.
• Fundera, Inc. (NerdWallet)
• StreetShares, Inc.
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