LEGAL AND REGULATORY ASPECTS OF MICROFINANCE

1. LEGAL AND
REGULATORY ASPECTS
OF MICROFINANCE

2. Introduction
 Microfinance has emerged as a “ World in which everyone, especially the poor and
socially marginalized people and households have access to wide range of affordable,
high quality financial products and services, including not just credit but also savings,
insurance and fund transfers.
 The term “ Microcredit” and “Financial Inclusion”.
 The features of MicroFinance -
■ Loan given without security
■ Loans to those people who live below the poverty line
■ Members of SHGs may benefit from micro finance
■ Maximum limit of loan under micro finance Rs.25,000/-
■ Terms and conditions offered to poor people are decided by NGOs

3. Need Of Microfinance
Micro-finance or financial services for the poor, offers as an extremely powerful
tool capable to alleviate some of the most challenging issues today -
■ India is said to be home of one third of the world’s poor, official estimates
range from 26-50 percent of more than one billion population
■ About 87% of the poorest households do not have access to credit
■ The demand for micro-credit has been estimated upto $30 billion; the supply
is less than $ 2.2 billion combined by all involved sectors.

4.  On 2nd April, 2014 Reserve Bank of India’s High Level Action Committee granted an
“in principle” approval to Bandhan to set up a bank.
 Bandhan was the only Micro Finance Institution amongst the 25 business giants like
Bajaj Finance, Aditya Birla Nuvo, L&T Finance and India Post in the foray for setting up
a bank.
 Bandhan’s mission was: “To reduce socio-economic poverty substantially and create
employment by targeting low-income households across the country through
providing cost-effective sustainable financial and non-financial services emphasizing
on social securities”.
 It sought to achieve its objective by giving small loans to the poor in order to raise their
incomes.
 Based on the model of “Individual lending through group formation”, it provided credit
facilities mostly to women for their social upliftment and economic emancipation.
 Credit was given only for income generating activities like vegetable
vending, sewing etc. and not for non-productive activities.
Bandhan Bank

5. Nabard Bank
■ National Bank for Agriculture and Rural Development (NABARD) is an
apex development financial institution in India, headquartered
at Mumbai with branches all over India.
■ The Bank has been entrusted with "matters concerning policy, planning
and operations in the field of credit for agriculture and other economic
activities in rural areas in India".
■ With the vision to facilitate sustained access to financial services for the
unreached poor in rural areas through various microfinance innovations
in a cost-effective and sustainable manner, NABARD, through the
department of ‘Micro Credit Innovations’, has continued its role as the
facilitator and mentor of microfinance initiatives in the country.
■ Nabard’s Objectives.

6.  Functions include – Credit Distribution, Development and Regulatory
function.
 Examples –
1. Dairy Entrepreneurship Development Scheme
2. Capital Subsidy Scheme for promoting Solar Photovoltaic Water Pumping
systems for Irrigation and other purposes

7. Small Bank Licenses
 Small finance banks are a type of niche banks in India.
 The aim behind these to provide financial inclusion to sections of the
economy not being served by other banks, such as small business units,
small and marginal farmers, micro and small industries and unorganised
sector entities.
 The firms must have a capital of ₹100 crore
 The guidelines of Small Bank Licenses

8. Cluster Finance
1. Self-Help Groups
Examples:
 A real life story shared by Ishita Akhoon in Society, Women Empowement
 Slum dweller to Jewellery Trainer
 Depressed, Uneducated Housewife Breaks all barriers to become most
important part of the Self Help Group & Trainer!
2. Joint Liability Group
 National Bank for Agriculture and Rural Development (NABARD) - JLGs
Scheme

9. The Grameen Bank meaning village bank is a microfinance organisation and community
development bank founded in Bangladesh.
Originated in the year 1976
Founded by Professor MuhammadYunus
In October ,1983 the Grameen Bank was authorised by national legislation to operate as
an independent bank.
It makes small loans to the impoverished without requiring collateral.
Nobel Peace Price
CASE STUDY ON GRAMEEN BANK – BANGLADESH
Grameen Bank

10. In 1997,Vikram Akula decided to start his own microfinance company by “using
technology and standardized systems to bring enough efficiency out of each tiny
transaction to lower costs” modelled on the lines of McDonald'sCorp. or Starbucks
Corp.
SKS Microfinance offers life assurance and a variety of financial loans –
■ Income Generation Loans;
■ Mid-Term Loans; LongTerm Loans;
■ Loans for purchase of products like cook-stoves, solar lights, water purifiers, mobile
phones, bicycles and sewing machines; and loans secured on gold jewellery.
 Case study - SKS Microfinance IPO: What WentWrong?
SKS Microfinance

11. SOME
RECOMMENDATIONS
BY GOVERNMENT
COMMITTEES ON
MICROFINANCE

12. Case Study
Impact Study of microfinance
on a visually impaired
customer & her blind husband

13. Urban Financial Inclusion
in India – A Case Study of
Dharavi Mumbai

14. Thank you
Name
Rici Sohani