Microfinance-B.V.Raghunandan

2,318 views

Published on

Basics of Microfinance with reference to India

Published in: Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,318
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
167
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Microfinance-B.V.Raghunandan

  1. 1. Micro-finance<br />B.V.Raghunandan,<br />SVS College,<br />Bantwal<br />
  2. 2. Micro-Finance: the Background<br />Loans from Organised Sector was security oriented, big in size,and procedure-ridden<br />Mohammad Yunus getting a Nobel Prize for the activities of Grameen Bank of BanglaDesh attracted the attention of the financial world<br />C.K.Prahlad advocating the Bottom of the Pyramid approach to inclusive development<br />
  3. 3. Money-lenders: the Fore-runners<br />Money lenders adopted a flexible system to suit the borrowers of micro-finance<br />Instead developing a similar model, the Government and RBI tried to curb their activities<br />Only NBFC institutions were regulated<br />Individuals operated as ever<br />Only after 2000, there is a change in the policy <br />
  4. 4. Definition of Micro-finance<br />MICROCREDIT IS THE EXTENSION OF SMALL LOANS TO ENTREPRENEURS TOO POOR TO QUALIFY FOR TRADITIONAL BANK LOANS. IN DEVELOPING COUNTRIES ESPECIALLY, MICROCREDIT ENABLES VERY POOR PEOPLE TO ENGAGE IN SELF-EMPLOYMENT PROJECTS THAT GENERATE INCOME - WIKIPEDIA<br />
  5. 5. Features of Microfinance<br />Borrowers are the poor<br />Small Amounts of loans<br />For Production, Consumption or House Construction and Shelter Improvement<br />Lenders use Intermediaries<br />Group Based Lending<br />A large Number of Financial Services<br />Simple Procedure<br />No Security<br />
  6. 6. Functions/Role of Microfinance Institutions<br />Providing loans<br />Accepting deposits<br />Remittance of Funds<br />Issue of credit cards/debit cards/ATM cards<br />Life-Insurance products<br />Non-life insurance products<br />Pensions<br />Factoring<br />Bills Discounting<br />Financial Counselling<br />
  7. 7. Types of MFIs<br />Savings and Credit Organization (SCO)<br />Small Farmers Development Program (SFDP) <br />Small Farmers Cooperative Limited (SFCL) model<br />Savings and Credit Cooperative (SCC) models, <br />Government programs<br />Donor supported models, and<br />Financial Intermediary Non-Government Organization (FINGO) models<br />
  8. 8. Microfinance in India<br />NABARD is recognised as the regulator of microfinance<br />1987, NABARD sponsored a research project<br />Group Based Approach(GBA) for lending to the poor was accepted<br />In 1994, RBI working group advised banks to lend through SHG, which came to be known as SHG-Bank linkage<br />
  9. 9.
  10. 10. Four Tier Approach<br />Tier I- SHGs<br />Tier II-NGOs<br />Tier III- Sec 25 NBFCs<br />Tier IV-MCI/Other NBFCs<br />
  11. 11. Tier I-SHG Bank Linkage<br />SHG is a voluntary group not exceeding 20 formed to promote the common economic welfare of the group members<br />Banks do not interfere in the management of SHG<br />Three models: Bank-SHG (20%) , Bank-SHG through intermediation by an NGO (72%) and Bank-SHG through intermediation by NGO,NBFC, MCI intermediation <br />
  12. 12. Tier II-NGO-SHG<br />NGOs are non-profit organisations<br />Registered under Societies Act/Trust Act/Sec 25 of Companies Act<br />NGOs provide finance to the SHGs<br />They also assisted SHGs to organise themselves as Federations<br />Banks follow parameters while providing finance through NGOs<br />
  13. 13. Tier III-NBFCs U/S 25 of CA<br />Many NGOs want to convert to NBFCs to provide credit directly<br />They also want to accept deposits<br />To do that, they should have a minimum capital of Rs.200 lakhs<br />They have to wait for three years after registration to accept deposits<br />Again they can accept only time deposits<br />
  14. 14. Tier IV-NBFCs and Micro-Co-operative Institutions<br />NBFCs and MCI are allowed to collect deposits<br />MCIs are registered under Co-operative Societies Act or Mutually aided Co-operative Societies Act<br />MCIs enjoy operational freedom from government<br />NBFCs are registered under Companies Act and regulated by RBI<br />
  15. 15. RBI Guidelines<br />Interest rates are left to the discretion of SHG or MFI<br />Banks may choose their own intermediary<br />Microfinance by banks is priority sector lending<br />Banks can have their own criteria in selecting the intermediary<br />Banks may have their own lending norms<br />Banks can devise loan and saving products<br />MF for consumption, production and housing<br />Simple procedure and documentation<br />Delegatory powers to branches to expedite loans <br />
  16. 16. “Unless all the discoveries that you make have the welfare of the poor as the end in view, all your workshops will be really no better than Satan’s”-Mahatma Gandhi<br />

×