Envisioning Micro Finance


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Envisioning Micro Finance

  1. 1. ENVISIONING MICROFINANCE Siddharth Dasgupta -033; Manoj Kumar - 018 Ravi Sharma – 028; Business Research Methods IMT - December, 2009
  2. 2. What is Microfinance? Microfinance is the supply of loans, savings and other basic and other basic financial service to poor – CGAP Microfinance is the proviso of financial services/entrepreneurs to low-income clients, including consumers and the self-employed, who conventionally lack access to banking and related services – Financial Gateway IMT - December, 2009
  3. 3. About Microfinance IMT - December, 2009 The modern Microfinance movement dates back to the 1970’s when experimental programs in Brazil, Bangladesh and few other countries began to extend tiny loans to the group of rural women in order to set up self satiating enterprise. By lending to groups of women, where every member of the group guaranteed the repayment of all members, these micro credit programs challenged the prevailing conventional wisdom and proved that poor people without collateral could be “credit worthy”, when offered the opportunity, they would repay the loans with interest at extraordinary rates or repayment.
  4. 4. Microfinance and Microcredit  Microfinance refers to loans, savings, insurance, transfer savings and other financial products targeted at low income clients.  Microcredit refers to small loan to a client made by a bank or other institution. Microcredit can be offered, often without collateral, to an individual or through group lendingIMT - December, 2009 Microfinance Microcredit
  5. 5. Face of Microfinance in India IMT - December, 2009 Evolution of Microfinance in India Microfinance has been in practice for ages (though informally) Legal framework for establishing the co-operative movement set up in 1904 Reserve Bank of India Act, 1934 provided for the establishment of the agricultural credit development Nationalization of banks - 1964 Regional Rural Banks created in 1974 – established as an apex agency for rural finance in 1982 Passing of mutually aided Co. Op. Act in AP - 1995
  6. 6. The Profile of Microfinance in INDIA IMT - December, 2009 The Scenario Estimated that about 30% of India falls under BPL, i.e. more than 350 million people live below poverty line This translates more than 75 million households Annual credit demand in of Indian rural is more than INR 60,000 crore Cumulative disbursements under all microfinance programs is only about 100,000 crore. Only about 5 % rural poor has access to Microfinance.
  7. 7. Study Impact IMT - December, 2009  Our study primarily envisages, how the present microfinance programs is trying and actually made some differences in rural poor’s lives.  By means of in – depth sample studies and FGD’s, we sketched out different portraits of microfinance in India.  Got a first hand insight in some new emerging concepts like CIG’s.
  8. 8. Study Impact contd… (testimonies) IMT - December, 2009
  9. 9. Conclusions  Microfinance which is more focused on credit rather than savings or other services is largely routed through women in poor households  In microfinance, transparency is practiced on financial performance & this is the most important element in making microfinance more acceptable & approachable for the target group  The challenge is to practice transparency in an environment where non-transparency is the norm, however Microfinance Transparency will create an enabling environment, which means enabling industry-supported “truth-in-lending”  In India, the microfinance fraternity seems to have come to an understanding regarding the potential of technology and the value that it adds to microfinance businesses  The graduation to the next level may necessitate resolving the techno-commercial issues as well as addressing the regulatory considerations through targeted advocacy efforts. The process may be aided through more focused experimentation and innovation incorporating technology and microfinance. IMT - December, 2009
  10. 10. The Status of Microfinance in India Some of the considerable gaps between demand and supply of all the financial services – Majority of the poor are excluded from the financial services, we found the following reasons for the same:  Bankers feels that it is marked with ample risk and uncertainties.  High transaction cost  Unfavorable policies like cap on interest rates which effectively limits the viability of servicing the poor. IMT - December, 2009
  11. 11. Contd….  Limited accessibility to capacity enhancement support which is again a very vital variable in terms of the quality of the portfolio.  About 52% of the poor still borrow from informal sources  Near about 68% of the poor don’t have a deposit account  Nearly 80% have no access to formal sources  Less than 19% of the households have any insurance, whatsoever  Almost negligible number have access to health insurance IMT - December, 2009
  12. 12. Sigh of Relief  About 76 % of the MFIs are registered as societies.  About 37 % are Trusts  About 73 % of the MFIs follow the operating model of SHGs.  Large concentration in South India  Nearly 640 MFI initiatives have a cumulative outreach of 4.65 crore poor households  NABARD’s bank linkage program has cumulatively reached about11.2 lakh SHGs with nearly 6.8 crore households.IMT - December, 2009
  13. 13. Challenges Ahead  Appropriate legal structures for the structured growth of MF operations  Ability to access loan funds at reasonably low rates of interest.  Ability to attract and retain professional and committed human resources.  Design of apt MIS including user friendly software for tracking accounts and operations.  Ability to innovate, adapt and grow.  Bring out a compendium of small and micro enterprises for the MF clients.  Identify and prepare a panel of locally available trainers.  Ability to train trainers.  Capacity to provide backward linkages or create support structures for marketingIMT - December, 2009
  14. 14. IMT - December, 2009 “IF You are Uplifting The Poor Your Uplifting The Nation” -> Mahatma Gandhi
  15. 15. IMT - December, 2009