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Paper Presentation On “Microfinance in India” Presented ByDeepak Tiwari Ravichandra.G Sir M. Visvesvaraya Institute of Technology Bangalore 03/18/13 1
CONTENTSIntroductionFactsRegulatory Bodies and their activities. Status of Micro Finance.Self Help GroupsRole of Banks to MFI’sProblems in MFI’sSolutionsConclusion
INTRODUCTIONProvision of financial services such as credit, saving, andinsurancePoor individuals which fall below the poverty lineImpact of improving livelihood opportunities through theprovision of capitalFounded of the Grameen bank in Bangladesh by YusufGroup lending, individual lending , the provision of savingsand insurance, capacity building, and agricultural businessdevelopment servicesCreation of social value
Facts Due to its large size and population of around 1000 million, IndiasGDP ranks among the top 15 economies of the worldA group of micro-finance practitioners estimated the annualized creditusage 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 theausterely defined poverty line and with more than 80 percent unable toaccess credit at reasonable rate.As on 31 March 2009, there are more than 61 lakh saving-linkedSHGs 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.
Regulatory Bodies And Their ActivitiesSHGs, NGOs,NABARD,1995The National Microfinance Taskforce,1999Working Groups on Financial Flows to the Informal Sector.2002Microfinance Development and Equity Fund,NABARD,2005Working group on Financing NBFC’s by Banks-RBIActivities include Microcredit, Micro savings, Micro insurance andRemittances
SELF HELP GROUPS(SHGs)Major role on poverty alleviation in rural India as they Activelyengage in saving and creditCreate some control over capital-very small amountsGradually away form exploitation and isolation10-25 members and collect savings from members typically once aweekGovernment of government and non-governmental agencies, they non-governmental agencies, they now make up 90 % of all SHG’s.Start without any external financial capitalSmall internal loans for micro finance enterprise
Self Help Groups2009-102008-092007-082006-072005-06
Sources of capital and links between SHG’s and banksLink up with financial institutions-loans for investments inrural enterpriseNGO’s and banks are giving loans –Matching loansRepayment-Recommendations by group, facilitators collaterals providedNote: Nabard to refinance banks at 6.5% pa Banks to SHG’s at 12% pa Banks to NGO’s at 10.5% pa
The Problems of Mainstream MFIsBorrower Unfriendly Products and ProceduresInflexibility and DelayHigh Transaction Costs, both Legitimate and IllegalSocial Obligation and not a Business OpportunityFinancing to Alternative MFIsComplexity in Legal and Regulatory Framework
Problems for Alternative Micro-Finance InstitutionsThe alternative finance institutions have not been fullysuccessful in reaching the needy. There are many reasons forthis:1. Financial problems leading to setting up of inappropriatelegal structures and Inappropriate Legal Forms 2. Lack of commercial orientation3. Lack of proper governance and accountability4. Isolated and scattered
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 upto Rs. 50,000 for agriculture, allied and non farm activities and in case of housing, loans upto 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
CONCLUSIONIndia’s achievement of the MDG of halving the population of poor by2015 as well as achieving a broad based economic growth also hinges ona successful poverty alleviation strategy. In this backdrop, the impressivegains made by SHG-Bank linkage programme in coverage of ruralpopulation 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 andyou 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