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Microfinance : An issue and futurePRESENTED BY :SUDHIR KUMAR
What is MicrofinanceCREDIT SAVINGINSURANCETRAINING
Evolution of microfinance in India Microfinance has been in practice for ages through informallyway. Legal framework fro establishing the co-operative movementset up in 1904 . Reserve bank of India Act , 1934 provided the establishmentof the Agriculture Credit Department . Nationalization of banks in 1969 . Regional rural banks created in 1975. Set up of gamin bank in Bangladesh by Muhammad. Yunus in1976. NABARD established as a apex body for rural finance in 1982.
Scenario of Microfinance in India India population growth is more than 100 Crore , around 32Crore are living below the poverty . only 20 % access loan from formal sources and 80 % frominformal sources . out of that 20% , only 14% have access to microfinance . During 2011-2012 ,the microfinance through MFI channelhas grown 16.25 % in 2012 in terms of client out reach and13.75% in term of credit portfolio . Customers of microfinance are “ small and marginalfarmers”, “rural artisan and economically weaker sections” .
Salient feature of microfinance Borrowers are from the low income group. Loans are of small amount – micro loans. Short duration loans. Loans are offered without collaterals. High frequency of repayment. Loans are generally taken for income generation purpose.
Channels of Microfinance1. SHG-Banking linkage programe (SBLP)2. Microfinance institutionsSHGBLPCustomerMFIs
Issues of microfinance in India High rate of interest Lending for non productive purposes. Multiple borrowing and lending Ghost loans Coercive practices
Malegaon report on MFIs On the recommendation of Malegaon report , RBI put up aregulation on MFIs , by put a cap on lending rate of MFIs at26 % per annum and a margin cap of 12 % over cost of funds,whichever is lower . In order to control overleveraging, RBI laid down rule thatonly two MFIs lend to one borrower and both together cannotprovide loans beyond Rs50,000. For controlling coercive practices , RBI also set up agrievance redressed machinery .
Problem face by MFI Financial illiteracy Managerial problems In ability to generate fund . Drop out and migration of Group members .
Future Legislation and regulation by RBI to a great extent addressedthe flaws in MFIs in India. It can play a big role in povertyelevation , empowerment and sustainable development.