A Study of Micro Finance Institutions
(MFIs) In India
Dr. Harshal A. Salunkhe
Asst. Prof. SIBMT

INTRODUCTION
• Provision of financial services such as credit, saving, and
insurance
• Poor individuals which fall below the poverty line
• Impact of improving livelihood opportunities through the
provision of capital
• Founded of the Grameen bank in Bangladesh by Yusuf
• Group lending, individual lending , the provision of savings
and insurance, capacity building, and agricultural business
development services
• Creation of social value

• Due to its large size and population of around 1000 million,
Indias GDP ranks among the top 15 economies of the world
• A group of micro-finance practitioners estimated the
annualized credit usage of all poor families Sat over Rs 45,000
crores, of which some 80percent is met by informal sources.
• There are about 60 million households below or just above the
austerely defined poverty line and with more than 80 percent
unable to access credit at reasonable rate.
• As on 31 March 2009, there are more than 61 lakh saving-
linked SHGs and more than 42 lakh credit-linked SHGs and
thus, about 8.6crore poor households are covered under the
programme and 4 out of 5microfinance clients in India are
women.

SELF HELP GROUPS(SHGs)
• Major role on poverty alleviation in rural India as they
Actively engage in saving and credit
• Create some control over capital-very small amounts
• Gradually away form exploitation and isolation
• 10-25 members and collect savings from members typically
once a week
• Government of government and non-governmental agencies,
they non-governmental agencies, they now make up 90 % of
all SHG’s
• Start without any external financial capital
• Small internal loans for micro finance enterprise

Problems for Alternative Micro-Finance
Institutions
• The alternative finance institutions have not been fully
successful in reaching the needy. There are many reasons for
this:
• Financial problems leading to setting up of inappropriate legal
structures and Inappropriate Legal Forms
• Lack of commercial orientation
• Lack of proper governance and accountability
• Isolated and scattered

The Problems of Mainstream MFIs
• Borrower Unfriendly Products and Procedures
• Inflexibility and Delay
• High Transaction Costs, both Legitimate and Illegal
• Social Obligation and not a Business Opportunity
• Financing to Alternative MFIs
• Complexity in Legal and Regulatory Framework

Solutions
• Greater legitimacy, accountability and transparency in MFIs
• There is a need to recognize a separate category of
Microfinance
• It should be specified that at least 80% of the assets of MF-
NBFCs should be in the form of microcredit of up to Rs.
50,000 for agriculture, allied and non farm activities and in
case of housing, loans up to Rs. 1,50,000, per individual
borrower.
• MF-NBFCs as Business Correspondents (BCs) for a local feel.
• Relaxation in FIPB guidelines and Unifying regulatory
oversight
• Tax Concessions and Accounting and Disclosure Norms.
• As micro-insurance agents

CONCLUSION
• India’s achievement of the MDG of halving the population of
poor by 2019 as well as achieving a broad based economic
growth also hinges on a successful poverty alleviation strategy.
In this backdrop, the impressive gains made by SHG-Bank
linkage programme in coverage of rural population with
financial services offers a ray of hope.
• Underlying Belief of Self Help Groups..............
“Give a man a fish and you feed him a day but teach him how to
fish and you feed him a lifetime”
• Many little things done in many little places, by many little
people, will change the face of the world. - An old Chinese
saying