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Micro Finance Industry PPT - feb 2014- Sushil Chokhandre
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Micro Finance Industry PPT - feb 2014- Sushil Chokhandre



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  • 1. Presentation on Micro Finance Micro Finance, Macro Impact Presented by: Sushil Chokhandre Sushil.chokhandre@yahoo.com Updated on : Feb 2014 Sushil Chokhandre
  • 2. Micro finance Provision of financial services such as savings, credit & insurance to unemployed or low-income individuals or groups which fall below the poverty line Sushil Chokhandre
  • 3. Current Scenario – Indian Market • India's GDP growth is expected to slow to an 11-year low of less than 5% in the fiscal year ending March. • 35-37% population below poverty level. • 450 million unbanked people in India who live in rural areas • 87% of the rural households do not have access to credit. • Estimated credit demand: USD 14 bn • Demand met so far: USD 700mn • Next 3-5 years, around 65% of the rural population will have access to MFIs. Sushil Chokhandre
  • 4. Current Micro-Finance industry ICRA report: • The market potential:Rs.1.4-Rs 2.5 lakh crore. • Current size of the microfinance market: Rs.60,000crore. • The loan requirements are huge in rural areas but MFIs are extending only small-value loans. • a typical loan size is Rs. 10,000 and many borrow from two MFIs which is lower than the Rs. 35,00045,000 loans that many households are demanding. • Growth: at 30-35 per cent a year over the next three years. Sushil Chokhandre
  • 5. Current Scenario – Micro-finance Industry • The delinquency rate of Microfinance Institutions (MFIs) has declined by 20% between April and October 2013. • Microfinance institutions lending close to Rs.30,000 cr in current fiscal, 30% increase in qtr ended Oct13 & Growth is expected to increase by 40 per cent next fiscal. • The aggregate gross loan portfolio of microfinance institutions (MFIs) grew by 54 per cent in the second quarter ended 30-09-13, compared with the same period last year. • Over 90% of the MFIs (other than those restructuring) showed positive growth. • MFIs received total debt funding of Rs. 3,780 crore, of which, 86% came from banks and rest from other financial institutions. Sushil Chokhandre under corporate debt
  • 6. Microfinance companies • Micro Finance Institutions (MFIs) are the key players in helping and supporting the cause of financial inclusion. • Micro-finance companies in India usually borrow from mainstream banks and provide loans as small as $US200 to poor borrowers, mostly women, for starting small businesses such as buying livestock. • The micro-loan companies operate in areas where there are no bank branches and people traditionally have relied on loan sharks who charge exorbitant rates. • The MFIs are reaching to the 70% of the poorest districts of India Few Major MFIs – – – – – – Sushil Chokhandre SKS Microfinance. Grama Vidiyal Asmitha Microfinance Cashpro Microfinance Trident microfinance Samridhi Microfinance
  • 7. Types of MFIs • MFIs include non-governmental organizations (NGOs), credit unions, non-bank financial intermediaries, and evena few commercial banks. • Classification: Not for Profit MFIs NGO-MFIs Non-Profit Companies Mutual Benefit MFIs Mutually Aided CooperativeSocieties (MACS) and set up institutions. – For Profit MFIs – Non-Banking Financial Companies ( NBFCs) – – – – – Sushil Chokhandre
  • 8. Sushil Chokhandre
  • 9. Micro finance models • Conventional Method – community-based or in-house banking • Bank Partnership Model – The bank acts as the lender and the MFI acts as an agent which takes care of work related to supervision, recovery and credit monitoring. • Banking Correspondents – MFIs are allowed to collect the savings from the targeted population on behalf of the bank. • Service Company Model – Bank forms its own MFI perhaps as an NBFC, and then it works together with that particular MFI to provide loans and other services. Sushil Chokhandre
  • 10. Micro Finance - Streams • Demand Stream • • • Forum of clients– primary poor SHGs and un-organised individual clients. Association/organisations of poor SHGs and its federations, cooperatives (community ownership and governance) Enabling Stream • Promotional donors • • institutions: NGOs, philathropic institutions, Regulatory institutions: RBI/ State and Central Goverments. Supply Stream **Savings and credit • • • • • Sushil Chokhandre Commercial ,rural and Private Banks Cooperative banks Speacialised developemtn financial institutions ( housing banks, SIDBI) Insurance companies Post office
  • 11. SWOT Analysis - Strength • Reliable business model. • Reduces poverty • Attract investors looking to spread risks and diversify their portfolios. • Focus on consumer protection, transparency, and governance. • Strong support from banks & NGOs who are able to access bulk funds for on-lending. • Huge networking available. • SHG bank linkages- widely adopted approach involving bank, NGOs & poor Sushil Chokhandre
  • 12. SWOT Analysis: Weaknesses • • High interest rate than the rates charged on normal bank loans. • High transaction cost • Large segment is still untouched due to access problem. • Many poor still prefers informal providers (local Zamindars, Chit Funds) of finance which charge at a high interest rate. • MFIs targets WOMEN. • Many places in States such as Uttar Pradesh, Bihar and Madhya Pradesh are under-served. • Sushil Chokhandre Not properly regulated. Loan fatigue- poor recovery, politicized
  • 13. Opportunities • Rate ceilings from Govt. • Huge demand and supply gap • Huge potential & heavy need for this market. • Participation institutions. • Inclusion of innovative models and initiatives. • Employment Opportunity • Opportunity for Pvt. Banks • Government should encourage competition, capacity building, and innovation to lower interest rates, and costs in microfinance. Sushil Chokhandre of private industries and
  • 14. Threats • • Global financial storm • Uncertain regulatory underlined concerns. • High Competition • policies and procedures of central banks which might pose hurdles to poor people. • Risks to MFIs – Credit risk, Operational risk, strategic risk, liquidity risk, market risk, fraud and legal risks, reputation risk, External business risk. • Sushil Chokhandre Neophyte Industry Over involvement of Government future due to the
  • 15. This presentation has been made from my understanding of the concept through internet, through various sources.. This ppt is for reference only. Sushil Chokhandre