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Micro finance in India

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An overview of Micro finance in India

Micro finance in India

  1. 1. Paper Presentation On “Microfinance in India” Presented ByDeepak Tiwari Ravichandra.G Sir M. Visvesvaraya Institute of Technology Bangalore 03/18/13 1
  2. 2. CONTENTSIntroductionFactsRegulatory Bodies and their activities. Status of Micro Finance.Self Help GroupsRole of Banks to MFI’sProblems in MFI’sSolutionsConclusion
  3. 3. INTRODUCTIONProvision of financial services such as credit, saving, andinsurancePoor individuals which fall below the poverty lineImpact of improving livelihood opportunities through theprovision of capitalFounded of the Grameen bank in Bangladesh by YusufGroup lending, individual lending , the provision of savingsand insurance, capacity building, and agricultural businessdevelopment servicesCreation of social value
  4. 4. Facts Due to its large size and population of around 1000 million, IndiasGDP ranks among the top 15 economies of the worldA 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.
  5. 5. Regulatory Bodies And Their ActivitiesSHGs, NGOs,NABARD,1995The National Microfinance Taskforce,1999Working Groups on Financial Flows to the Informal Sector.2002Microfinance Development and Equity Fund,NABARD,2005Working group on Financing NBFC’s by Banks-RBIActivities include Microcredit, Micro savings, Micro insurance andRemittances
  6. 6. Micro Finance In India
  7. 7. SELF HELP GROUPS(SHGs)Major role on poverty alleviation in rural India as they Activelyengage 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 aweek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
  8. 8. Self Help Groups2009-102008-092007-082006-072005-06
  9. 9. Sources of capital and links between SHG’s and banksLink up with financial institutions-loans for investments inrural enterpriseNGO’s and banks are giving loans –Matching loansRepayment-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
  10. 10. Banks assistance to MFIs
  11. 11. Comparative Analysis of Micro finance services offered to the poor:
  12. 12. Investment Credit - Refinance
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. CONCLUSIONIndia’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
  17. 17. Any Questions