1. MICROFINANCE

2. WHAT IS MICRO FINANCING?



They are very small loans, made to the rural
poor in developing countries who normally do
not qualify for traditional banking credit.
This is often the only way they can establish
a business and lift themselves out of
poverty.
Microfinance refers to the provision of
financial services to low-income clients,
including consumers and the self-employed.

3. WHAT IS MICRO
FINANCING?

More broadly, it refers to a movement that
envisions “a world in which poor have
permanent access to an appropriate range of
high quality financial services, including not
just credit but also savings, insurance, and
fund transfers.

4. WHAT IS MICRO FINANCE ?

Micro Finance is the supply of loans,
savings, and other basic financial
service to the poor .
-> CGAP
To
most, micro finance means providing
very poor families with very small loans
(micro credit) to help them engage in
productive activities or grow their tiny
businesses.
-> Financial
Gateway
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5. ABOUT MICRO FINANCE

Source:
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The modern micro finance
movement dates back to the
1970s
when
experimental
programs in Bangladesh, Brazil,
and a few other countries began
to extend tiny loans to groups of
poor women to invest in micro
enterprises
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6. ORIGIN OF MICRO FINANCING
Although neither of the terms microcredit or
microfinance were used in the academic
literature before the 1980s or 1990s, the
concept of providing financial services to low
income people is much older.
 While the emergence of informal financial
institutions in Nigeria dates back to the 15th
century, they were first established in Europe
during the 18th century as a response to the
enormous increase in poverty since the end of
the extended European wars.(1618 –1648).


7. ORIGIN

Professor Yunus founded his
Grameen Bank in 1976 i.e.
first
MICROFINANCE
institute.
Professor Yunus Pioneer of
Grameen bank &
microfinance.

8. GRAMEEN BANK
Professor Yunus founded his Grameen Bank
in 1976 during a devastating famine in
Bangladesh.
 Today it has 6.6 million borrowers of whom
97% are women.
 This focus on female borrowers in a society
where women are frequently forced to take
responsibility for their entire family is one of
the features that caught the Nobel
Committee's attention.


9. MICRO FINANCE IN INDIA
Evolution of Micro finance in India
 Micro finance has been in practice for ages
( though informally).
 Reserve Bank of India Act, 1934 provided
for the establishment of the Agricultural
Credit Department.
 Nationalization of banks in 1969
 Regional Rural Banks created in 1975.
 established as an apex agency for rural
finance in 1982.
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10. THE PROFILE OF MICRO FINANCE IN
INDIA
The scenario
 Estimated that 350 million people live Below
Poverty Line
 This translates to approximately 75 million
households.
 Annual credit demand by the poor in the
country is estimated to be about Rs. 60,000
crores.
 Only about 5 % of rural poor have access to
micro finance
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11. PROVEN IMPACT OF MICROFINANCING

Increase in Savings
◦ While most households given
micro-credits were having
negligible or no savings, this
improved to Rs. 160-Rs. 460
and in some cases, the
average household savings
rose to as high as Rs. 1444.

12. PROVEN IMPACT OF MICROFINANCING

Changes in Borrowing Patterns
◦ With improvement in above two
factors, people were more
ready to borrow from the semiformal and formal sector rather
than their traditional creditors
i.e.
friends
and
family,
moneylenders, landlords.

13. Impact on income
◦ The average net income per
household increased from Rs
20177 to Rs. 26889.

14.  The
poor stay poor, not because they
are lazy but because they have no
access to capital.
 Grameen transactions take place at the
village level.

15.  By
avoiding both employers and
immoral local money lenders the
Grameen loan aims to break a
circle of exploitation.
 Typically a Grameen borrower
will use a loan to buy tools and
equipment to set up on their own
business.

16. WHY MICRO FINANCING?
Traditionally, banks have not provided
financial services to clients with little or no
cash income.
 There is a break-even point in providing loans
or deposits below which banks lose money on
each transaction they make. Poor people
usually fall below it.
 Because of these difficulties, when poor
people borrow they often rely on relatives or
a local moneylender, whose interest rates can
be very high.


17. FINANCIAL NEEDS OF POOR PEOPLE
Types of financial needs: Lifecycle
Needs:
such
as
weddings,
funerals,
childbirth,
education,
homebuilding,
widowhood, old age.
 Personal
Emergencies: such as
sickness, injury, unemployment,

18. FINANCIAL NEEDS OF POOR PEOPLE
 Disasters:
such as fires, floods,
cyclones and man-made events
like war or bulldozing of dwellings.
 Investment
Opportunities:
expanding a business, buying
land or equipment, improving
housing, securing a job (which
often requires paying a large
bribe), etc.

19. TYPES OF
ORGANIZATIONS
 Microfinance
providers in
India can be classified
under
three
broad
categories:
◦ formal,
◦ semiformal,
◦ And informal.

20. FORMAL
SECTOR
 The formal sector
comprises of the
banks such as NABARD, SIDBI and
other regional rural banks (RRBs).
 They primarily provide credit for
assistance in agriculture and microenterprise development and primarily
target the poor.
 Their
deposits at around Rs.
350billion and of that, around Rs.
250billion has been given as

21. SEMI FORMAL
SECTOR
 The
majority
of
institutional
microfinance providers in India are
semi-formal organizations broadly
referred to as MFIs.
 Registered under a variety of legal
acts, these organizations greatly differ
in values, size, and capacity. There
are
over
500
non-government
organizations (NGOs) registered as
societies, public trusts, or non-profit

22. MFI INVOLVED IN MICROFINANCE
Association for Sarva Seva Farms
(ASSEFA)
 Mitrabharati - The Indian microfinance
Information Hub Mysore Resettlement
and Development Agency (MYRADA)
 SADHAN - The Association of
Community Development Finance
Institutions
 SEWA: Self-help Women's Association
 SKS India - Swayam Krishi Sangam


23. Ngo’s involved in
microfinance
 CDF
(Co-operative Development
Foundation) in Andhra Pradesh
 LHWRF
(Lupin Human Welfare
Research Foundation) in Rajasthan
 UPLDC
(Uttar
Pradesh
Land
Development Corporation) in Uttar
Pradesh
 Group
Enterprise
Development
Project of EDI (Entrepreneurship
Development Institute of India) in

24. INFORMAL SECTOR
 In
addition to friends and family,
moneylenders, landlords, and
traders constitute the informal
sector.
 While
estimates
of
their
importance vary significantly, it is
undeniable that they continue to
play a significant role in the

25. Steps taken by India to
promote micro-financing
 Government
set
up
development banks, such as
SIDBI, NABARD which focused
on rural credit and microfinancing.
 NGOs
and
SHGs
were
encouraged to become the
govt’s arm in extending microcredit to the poor.

26. FOCUS ON WOMEN FOR MICRO CREDITS
 Among the poor, the poor women are
the most disadvantaged - they are
characterized by lack of education and
access to resources, both of which are
required to help them work their way
out of poverty and for upward economic
and social mobility.
 The problem is more acute for women
in countries like India, despite the fact
that women’s labor makes a critical
contribution to the economy.