The document is a presentation on microfinance in India. It discusses the definition of microfinance and provides statistics on microfinance initiatives in India, including the number of districts and clients served. It also notes trends in loan amounts and growth rates. The presentation outlines some of the key issues and challenges faced by microfinance institutions, such as rapid growth and commercialization leading to lower quality services. It concludes by recommending strategies for microfinance institutions to manage risks and maintain proper systems.
Microfinance in India: Growth, Issues and Solutions
1. Presented by:
Rohit Sethi
Jagan Institute Of Management studies,
Rohini, New Delhi
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2. To know the extent to which microfinance
initiatives have made a enduring difference
on the inclusive growth of a country
To recognize the need of micro finance and
its various dimensions on the service sector
To analyze the critical issues associated with
microfinance
To come up with the elucidations of the
troubles faced by MFIs
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3. Microfinance is defined as any activity that
includes the provision of financial services
such as credit, savings and insurance to low
income folks who fall just above the
nationality defined poverty line and poor
individuals who fall below that poverty line,
with the goal of creating social value.
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4. MFIs operate in 517 districts in India spread across 27 states
The total MFI client outreach as of March 2011 was 3.17 crores, while the
total microcredit outstanding was Rs. 2500 crores which have been
scrutinized to banks
During 2010-11, the microfinance through MFI channel has grown 18.75
percent in 2011 in terms of client outreach and 13.15 percent in terms of
credit portfolio
This year loan portfolio growth rate has decreased to 13.15 percent
compared to 56 percent in the previous year
MFIs collectively disbursed Rs. 33730 crores as loans to clients during
2010-11. Also, the average loan per client stood at Rs. 5706, which is less
than that of Rs.9766 in the last year
In 2010-11, more than one third of the MFIs displayed negative growth in
client and loan portfolio
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5. The committee headed by Sh. Y.H.Malegam was to
review the scope and objectives of regulations
governing MFIs with regard to :
Interest rates
Lending and recovery practices
Applicability of existing money lending legislations
Need for grievance redressed machinery
And other issues concerning this sector
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6. The NBFC-MFI to hold not less than 90% of its total assets (other
than cash and bank balances and money market instruments) in the
form of qualifying assets. The sub-committee also mentions that a
non NBFC-MFI cannot have loans to the microfinance sector
exceeding 10% of its total assets.
Individual ceilings to loans to a single borrower of Rs.25, 000 is
applicable.
Not less than 75% of the loans given by the MFI should be for
income-generating purposes.
There is a restriction on the other services to be provided by the
MFI which has to be in accordance with the type of service and the
maximum percentage of total income as may be prescribed.
All NBFC-MFIs to have a minimum net worth of Rs. 15 crores.
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8. The desire for very rapid (burgeoning) growth
driven by the need to scale up outreach and
enhance financial access through full blown
commercialization has resulted in many MFIs
allowing these (not-so-good) practices (use of
agents to source and target clients, etc) to
creep into their organizations
The desire for rapid growth and complete
commercialization thus appears to have led
many MFIs to cut corners and provide lower
quality services to its clients
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9. Maintain proper MIS
Internal Control System
Managing financial risk
Managing portfolio risk
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10. Report “status of microfinance in India”, NABARD
Dr. C.Rangarajan, chairman advisory council to the Prime Minister,
”Microfinance and its future directions”
‘de Aghion, Beatriz armetariz and Jonathan Mourduch. The economic of
microfinance, The MIT Press, Cambridge,Massachusetts
The Changing Face Of Microfinance In India by Raven Smith
Dicher, Thomas and Malcolm Harper. What’s Wrong With Microfinance
Institutions: Practical action
Ledgerwood, Joana and Victor White. Transforming Microfinance
Institutions: Providing Full Financial Services To The Poor. World bank
Mas, Ignacio and Kabir Kumar. Banking On Moblies: why, how and for
whom: CGAP Focus Note #48, july, 2008
Churchil, Craig. Forthcoming. Individual Micro Lending Case Studies.
Toronto. Calmeadow.
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11. Strategies for poverty alleviation through dovetailing the potential of
microfinance practices with non-timber forest products from
dipterocarps: Lesson from India by B.P.pethiya
Indian Microfinance Investment Environment Profile by slavea
Chakova, Nathenael Goldberg, Genevieve Meltford, Hind Tazi and Shane
Tomlonson.
Anil k Khandelwal,”Microfinance Development Strategy For India”’
Economic and Political Weekly
Vikram Akula,” Business basics At the base of the pyramid” Harvard
Business Review, June 2008
R Srinivas and M.S Sriram” Microfinance In India- Discussion”
Piyush tiwari and S M Fahad, HDFC, “ Concept paper- Microfinance
Institutions In India”
Annie Duflo, Research Co-ordinator, Centre For Micro Finance
Research, “ICICI banks The Poor in India”, Microfinance matters
Whitepaper on Microfinance: Issues and Analysis by Sarvagya
Upadhyaya, Eric Mitchell, Srinath Reddy and Aaditeshwar Seth
SIDBI microfinance reports accessed at
www.sidbi.com/micro/COCAUjjivan.pdf
RBI official website accesses at www.rbi.org.in
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12. Thank you all for being such
a wonderful audience
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