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Micro finance in India
This document presents information on microfinance in India. It discusses how microfinance provides financial services like credit, savings and insurance to poor individuals. It notes that microfinance aims to improve livelihoods through capital provision. The document provides statistics on microfinance in India and outlines the roles of various regulatory bodies. It discusses self-help groups and their importance in poverty alleviation. It also examines the role of banks in providing assistance to microfinance institutions and some problems faced by these institutions. Finally, it proposes various solutions and concludes by emphasizing the potential of self-help groups and microfinance to reduce poverty in India.
Micro finance in India
- 1. Paper Presentation On “Microfinance in India” Presented By Deepak Tiwari Ravichandra.G Sir M. Visvesvaraya Institute of Technology Bangalore 03/18/13 1
- 2. CONTENTS Introduction Facts Regulatory Bodies andtheir activities. Status of Micro Finance. Self Help Groups Role of Banks to MFI’s Problems in MFI’s Solutions Conclusion
- 3. INTRODUCTION Provision of financialservices such as credit, saving, and insurance Poor individuals which fall below the poverty line Impact of improving livelihood opportunities through the provision of capital Founded of the Grameen bank in Bangladesh by Yusuf Group lending, individual lending , the provision of savings and insurance, capacity building, and agricultural business development services Creation of social value
- 4. Facts Due to itslarge size and population of around 1000 million, India's GDP ranks among the top 15 economies of the world A group of micro-finance practitioners estimated the annualized credit usage of all poor families Sat over Rs 45,000 crores, of which some 80 percent is met by informal sources. There are about 60 million households below or just above the austerely defined poverty line and with more than 80 percent unable to access credit at reasonable rate. As on 31 March 2009, there are more than 61 lakh saving-linked SHGs and more than 42 lakh credit-linked SHGs and thus, about 8.6 crore poor households are covered under the programme and 4 out of 5 microfinance clients in India are women.
- 5. Regulatory Bodies AndTheir Activities SHGs, NGOs,NABARD,1995 The National Microfinance Taskforce,1999 Working Groups on Financial Flows to the Informal Sector.2002 Microfinance Development and Equity Fund,NABARD,2005 Working group on Financing NBFC’s by Banks-RBI Activities include Microcredit, Micro savings, Micro insurance and Remittances
- 6. Micro Finance InIndia
- 7. SELF HELP GROUPS(SHGs) Majorrole on poverty alleviation in rural India as they Actively engage in saving and credit Create some control over capital-very small amounts Gradually away form exploitation and isolation 10-25 members and collect savings from members typically once a week Government of government and non-governmental agencies, they non- governmental agencies, they now make up 90 % of all SHG’s. Start without any external financial capital Small internal loans for micro finance enterprise
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- 9. Sources of capitaland links between SHG’s and banks Link up with financial institutions-loans for investments in rural enterprise NGO’s and banks are giving loans –Matching loans Repayment-Recommendations by group, facilitators collaterals provided Note: Nabard to refinance banks at 6.5% pa Banks to SHG’s at 12% pa Banks to NGO’s at 10.5% pa
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- 11. Comparative Analysis ofMicro finance services offered to the poor:
- 12. Investment Credit -Refinance
- 13. The Problems ofMainstream MFIs Borrower Unfriendly Products and Procedures Inflexibility and Delay High Transaction Costs, both Legitimate and Illegal Social Obligation and not a Business Opportunity Financing to Alternative MFIs Complexity in Legal and Regulatory Framework
- 14. Problems for AlternativeMicro-Finance Institutions The alternative finance institutions have not been fully successful in reaching the needy. There are many reasons for this: 1. Financial problems leading to setting up of inappropriate legal structures and Inappropriate Legal Forms 2. Lack of commercial orientation 3. Lack of proper governance and accountability 4. Isolated and scattered
- 15. Solutions Greater legitimacy,accountability and transparency in MFIs There is a need to recognize a separate category of Microfinance It should be specified that at least 80% of the assets of MF-NBFCs should be in the form of microcredit of upto Rs. 50,000 for agriculture, allied and non farm activities and in case of housing, loans upto Rs. 1,50,000, per individual borrower. MF-NBFCs as Business Correspondents (BCs) for a local feel. Relaxation in FIPB guidelines and Unifying regulatory oversight Tax Concessions and Accounting and Disclosure Norms. As micro-insurance agents
- 16. CONCLUSION India’s achievement ofthe MDG of halving the population of poor by 2015 as well as achieving a broad based economic growth also hinges on a successful poverty alleviation strategy. In this backdrop, the impressive gains made by SHG-Bank linkage programme in coverage of rural population with financial services offers a ray of hope. Underlying Belief of Self Help Groups.............. “Give a man a fish and you feed him a day but teach him how to fish and you feed him a lifetime” Many little things done in many little places, by many little people, will change the face of the world. - An old Chinese saying
- 17. Any Questions