Microfinance Sector in india

1. Microfinance Sector
Presented : Sameer Lakhani
Submitted : Dr. R.S.Punadir
1

2. INDEX
Serial number Topic Slide Number
1 Introduction to
microfinance
3-4
2 Self Help Group 5-6
3 SHG-Bank Linkage Program 7-9
4 Microfinance Institutions 8-12
5 2010 AP Crisis 13
6 Grameen Bank 14
7 Recent Issues 15
2

3. INTRODUCTION TO MICROFINANACE
• ‘MICROFINANCE refers to loans, saving, insurance,
transfer service and other financial products targeted at low
income client
• MICRO CREDIT refers to a small loan to a client made
by a bank or other institution, without collateral, to an
individual or group
The goals are
• Eradicate Extreme Poverty & Hunger. • Achieve Universal
Education. • Promote Gender Equality & Women’s
Empowerment. • Reduce Child Mortality • Combat Diseases •
Developing Entrepreneurial Spirit
3HOME

4. Microfinance in India operates through two channels:
• Microfinance institutions (MFIs)
• NABARD’s SHGs bank linkage programme (SBLP) -a
partnership model between SHGs, banks and NGOs
SERVICES OFFERED
Loans, savings , insurance, pensions , financial counselling
HOME
4

5. • Homogeneous group of micro entrepreneurs with affinity
among themselves
• Voluntarily formed to save out a portion of their earnings and
mutually agree to contribute to a common fund of the group
• For meeting their productive and emergent credit needs at such
rate of interest, period of loan and other terms as the group
may decide
Objective:
•To meet the credit needs of the poor.
•To build mutual trust and confidence between the bankers and
the rural poor.
•To encourage banking activity both on thrift as well as credit side
in a segment of the population that the formal financial
institutions usually find difficult to cover.
Self Help Group(SHG)
5

6. • The group should be in active existence for at least a period of six
months.
• Have successfully undertaken savings and credit operations from
its own resources.
• Maintain proper accounts/records.
• Work democratically wherein all members feel that they have a
say should be evident.
• Be formed to reflect genuine need to help each other and work
together and Branch Manager should be convinced that the group
has not come into existence only for the sake of participation in
the project and availing benefits there under.
Eligibility
HOME

7. SHG-Bank Linkage Program
• Introduced as a pilot project by
NABARD in 1992,with participation of
Banks, SHG’s and NGO’s
• Initially there was only slow progress in
the programme up to 1999
• Financial Inclusion of Poor Women
• Loan Repayments
Impacts
• Reduced the incidence of poverty through
increase in income
• Empowered women
• Contributed to a reduced dependency on
informal money lenders
HOME

8. Models of SHG-Bank Linkage Program
Model I
• SHGs promoted, guided and financed by
banks
Model II
• SHGs promoted by NGOs/ Government
agencies and financed by banks.
Model III
• SHGs promoted by NGOs and financed by
banks using NGO’s as financial
intermediaries
www.nabard.org/pdf/Chap_VII.pdf
HOME

9. Microfinance Institutions
• A Microfinance institution is an organization that offers
financial services to low income populations
• The Microfinance Institutions (MFIs) accesses financial
resources from the Banks and other mainstream Financial
Institutions and provide financial and support services to the
poor
• These financial services are meant to help them in
undertaking economic activities, mitigating vulnerabilities to
income shocks, smoothening consumption, increasing
savings and supporting self-empowerment
HOME

10. TYPES OF MFIs
 Not-For-Profit MFIs
• Rashtriya Seva Samithi, Bandhan and Cashpor Micro Credit
 Mutual Benefit MFIs
• Mutually-aided co-operative societies (MACS; such as Mutually
Aided Cooperative Thrift Societies federation Ltd)
 For-Profit MFIs
• Non-banking financial companies (NBFCs; such as SKS
Microfinance Ltd and Spandana Sphoorthi Financials Ltd)
10

11. S.No Company Name Market Capitalisation(Approx.)
1 Bandhan Financial Services Pvt. Ltd. 1020 Cr
2 Janalakshmi Financial Services Pvt. Ltd. 529 Cr
3 SKS Microfinance Ltd 400 Cr
4 Ujjivan Financial Services Pvt. Ltd. 281 Cr
5 Equitas Microfinance Pvt. Ltd. 281 Cr
6 Satin Creditcare Network Ltd 127 Cr
7 Grameen Financial Services Pvt. Ltd. 121 Cr
8 Grama Vidiyal Micro Finance Ltd. 95 Cr
9 Sonata Finance Pvt. Ltd 81 Cr
10 Suryoday Micro Finance Pvt. Ltd 79 Cr
Top 10 MFI’s (Acc. To market Capitalisation )
HOME

12. REGULATIONS FOR MFI
• Minimum NOF(Net owned fund) of Rs. 5 crore, for North
Eastern Region minimum NOF requirement is Rs. 2 crore
• Minimum of 85% of net assets should be “qualifying assets”
• More than 75% loans should be given for income generation
• An NBFC which is not NBFC-MFI are not permitted to
extend loans to the micro-finance sector which exceeds 10
percent of total assets
12HOME

13. • Government of AP in October 2010 passed legislation to shut
down all private sector MFIs operating in the state.
• AP government claimed that private sector MFIs were
exploiting India’s poor by charging usurious interest rates and
practiced harsh recovery techniques
• The impact of the AP Act affected 450 million people
• The AP Act was adopted, MFI disbursements in AP alone had
diminished from Rs 5,000 crore to a mere Rs 8.5 crore
• Its actions resulted in a 600-fold decrease in financing
• Creating a severe shortage of much needed finance to the
rural poor, India’s most vulnerable citizens
2010 AP Crisis
HOME
13

14. Grameen Bank Model
• In 1976,Dr. Mohammed Yunus launched the
Grameen Bank Project in Jobra to experiment with a
credit system
• In October 1983, the Government of Bangladesh
passed special legislation
• Borrowers of Grameen Bank own 95% of its shares,
while 5% by Government of Bangladesh
• Grameen Bank had lent money to 8.34 million
borrowers, 96% of whom are womenhttp://trace.tennessee.edu/cgi/viewcontent.cgi?article=1
137&context=pursuit HOME
14

15. Recent issues
• MFI will soon have up to Rs 450 crore more to lend -
Economic Times, 23 Jun, 2015
• MFIs plan to raise Rs 20,000 crore over next 18
months - The Economic Times, 9 Jul, 2015
• PM Modi launches MUDRA Bank, expected to
benefit 5.77 crore micro-finance institutions in India-
IBN Live, Apr 08, 2015
•
http://economictimes.indiatimes.com/ HOME
15