year of credit
2006 Md. Yunus
Provision of Financial services
Utilizes credit, saving, &
Better cope with risk
“Loans of very small amount not exceeding
50,000/borrowers provided by bank either
directly or indirectly through SHG/NBFC/MFI”
Easy access to credit
Least formal & official obligation
Utilize social collateral to ensure loan repayment.
Higher interest rate often 30% to 70% annually
(<300% to 3000% of traditional money lenders)
Shorter loan cycles & weekly payments.
The peer pressure encourage loan repayment (>95%)
Difficulty in filling
Ensure right to
Mix with the
Why Microfinance Can Change
the Way the World Works
Key Non-Financial Products and Services
Health and education
Business advisory services
Financial counseling and training
Dealing with legal barriers
To bring economic & social
change to the poor.
To make profit.
Based on trust Based on collateral
Looks at what the borrower
Look at what the borrowers
Located in rural areas Located in urban areas
The bank goes to the
Customers have to go to the
Flexible payment scheme Strict payment scheme
borrowers are poor people borrowers are wealthy men
health care &
MF: Value creation for women
Microfinance in INDIA
• The credit requirement of the poor in India has
been estimated to be around Rs.50,000
crore/annum. But the formal banking sector is
meeting only Rs.5000 crore i.e. 10% of the total
demand despite the fact that India has the 4th
largest banking infrastructure in the world.
• Linking with SHG to the banks has become a
workable way of channelizing mc to the poor as
group lending rather than individual lending
ensures high repayment rate.
Gov.organisation promoting MF
Small Industries & Development Bank of India (SIDBI)
• The mc scheme was formulated & put into
operation in March 1994.
• It aims at boosting the small-scale sector growth,
employment generation & upliftment of rural poor,
Mahila Vikash Nidhi(MVN)
• MVN is specially designed fund for economic
empowerment of women.
• Training & employment opportunities are provided
to them through creation of necessary
National Bank for Agriculture & Rural Development
• A pilot project for linking SHG with banks was launched
by NABARD in 1992.
• The RBI persuaded commercial banks, regional rural
banks & cooperative banks to actively participate in
the linkage programme.
• Under the RBI guidelines, banks were given permission
to open saving bank account in the name of SHGs &
relaxation of security requirements.
• Thus an informal credit system was evolved with
assistance from formal financial institutions.
• The agencies involved in the schemes were NABARD,
Banks, NGOs & SHGs members.
•The SHG-bank linkage programme was started as an Action
Research project in 1989 & later introduced by NABARD in
•There are approx. 2.3 lakh SHGs in the country covering
about 35 mn BPL household which is more than 50% of the
total no. of households in the country.
•The outreach of the programme has enabled an estimated
427 lakh poor households to gain access to micro-finance
from the formal banking system.
•More than 90% of the groups linked with banks are exclusive
•More than 400 women join the SHG movement in India every
•An NGO joins Mf programme every day.
Microfinance Institution (MFI)?
• a microfinance institution is an organization that offers
financial services to low income populations.
• The no. of MFIs is estimated to be around 800.
• in 2005, five leading MFIs from India ranked in the list of top
20 fastest growing MFIs in the world.
• The majority of India's top 25 MFIs already are, or are working
to become, profit-oriented NBFC–MFIs.
• Despite the growth, there is considerable unmet demand for
credit in India. According to a World Bank report, only 9% of
poor families in India are covered by microfinance.
• Of the projected credit requirement of $10,909 million, only
$1,050 million is met by microfinance.
• Spandana 9,16,261
• Share 8,26,517
• SKS 5,13,108
• Bandhan 4,49,304
• AML 4,16,829
• Microcredit Foundation of India (MFI) 4,10,329
• KAS 3,94,462
• Cashpor 2,01,692
• BISWA 2,00,912
• BASIX 1,98,282
MFI Total no. of Active Borrowers (2007)
Top 10 India MFI by Number of Active Borrowers
MFIs are not evenly distributed despite the fact
that the demand is widespread.
MFIs are clustered primarily in the south, with
two-thirds of all MF clients being in AP, TN and
Data shows that 65% of MF is only found in South
India among that around 55% is only found in
THE GEOGRAPHICAL DISTRIBUTION OF
MF SERVICES IN INDIA
REGIONAL DISTRIBUTION OF MICROFINANCE SERVICES:
THE SOUTH STILL DOMINATES
In the year from 2006
to 2007, the MFIs
operations to 65
districts. Out of these
65 districts, only 13
in the South and
several were in states
such as UP, Bihar, and
relatively low levels of
To visit Bank
• Less receptive
• Recquires time
In 2006,Over 3,300 MFIs reached 133 mn
clients with microloan
Among them 93 mn of the clients were
poorest when they took their 1st loan
85% of these poorest clients were women.
By the end of 2006, mf services had reached over
79 mn of the poorest women in the world.
Women Entrepreneurs & MICRO FINANCe
Source: Microcredit summit compaign Report 2007
MFI borrowers as a Share of female population,2007
As the 70% of world’s poor are women targeting women
borrowers make sense from a public policy standpoint.
The business case for focusing on female client is
substantial, as they register higher repayment rates.
They contribute larger portions of the income to
household consumption than their male counterparts.
Children of women mf borrowers also reap the benefits, as
there is an increased likelihood of fool-time school
enrolment & lower drop out rates.
Studies show that new incomes generated from
microenterprises are often 1st invested in children’s
education, particularly benefiting girls.
Giving women a chance to be entrepreneurs creates
a powerful catalyst towards greater social equality
Studies show poor women who secure micro-loans
experience significantly lower domestic violence
In addition to helping families emerge from poverty it
is helping to move towards a better life for the next
has reduced the incidence of poverty
through increase in income
Families participating in the programme
have reported better school attendance &
lower drop out rates.
It has contributed to a reduced dependency
on informal money lenders & other non –
higher income help women to better perform their reproductive
role as brokers of the health, nutritional, & educational status of
other household members.
Increasing women’s employment & improving the productivity of
women’s income generating activities.
In certain areas it has reduced child mortality, improved maternal
health & the ability of the poor to combat disease through better
nutrition, housing & health especially among women & children.
It has empowered women by increasing the value of their assets
& generally by giving them better control over decisions that
affects their lives.
Enhancing their self confidence and status within the family as
independent procedures and providers of valuable cash
resources to the household economy.
Even when women loose control over the use
of their loans, their overall status in the
household may improve due to their role as a
Handing over loans to men may help to secure
stability by easing cash flow bottlenecks in the
Women may also use credit as a bargaining
chip to gain access to other opportunities
offered by financial institutions, such as
training, education & information.
•The World Bank estimates as there are now over 7000
microfinance institutions, serving some 16 million poor
people in developing countries. The total cash turnover of
MFIs world-wide is estimated at US$2.5 billion and the
potential for new growth is outstanding.
•There is a potential demand for microcredit services
from seven million borrowers, as there is an estimate that
only less than 2 per cent of poor people have access to
financial services (credit or savings) from sources other
than money lenders.
IMPACT OF BUISINESS TRAINING
MICROFINANCE CONFERENCE January 18, 2008SOURCE:-
•Acess to resources alone does not automatically translate into
empowerment or equality.
•In order to resources to empower women, they must be able to use them
for a purpose that they choose.
Women who have been excluded from decision
making for most of their lives often lack this sense
of agency that allows them to define goals & act
effectively to achieve them.
“There is education in the family, first you should
not speak because you are a girl, then later you
shouldn’t speak because no one will marry you,
then later you shouldn’t speak because you are a
new bride Finally, you might have the chance to
speak but you don’t speak because you have
forgotten how to”
Although the result are not visible immediately but they
have long lasting effect on the society
Poor Women who are neglected for credit many years on
giving resources proves to be better borrowers than men.
Due weightage should be given to equipping the poor with
the necessary skills to become efficient money managers &
successful entrepreneurs so as to avoid more & more people
falling into debt traps.
Govt. should create an environment conducive to the
growth of micro-enterprises by providing the required
infrastructural facilities, technical & marketing support.