The document discusses microfinance features such as providing small loans and financial services to low-income individuals without collateral. It describes microfinance objectives like providing access to financial services to help poor households finance business activities and stabilize consumption. Majority of microfinance clients are self-employed, low-income individuals, including many women near the poverty line. The status and evolution of microfinance in India is examined, along with the roles of institutions like NABARD in promoting rural development through microfinance initiatives.

2. Microfinance Features…
• financial services : poor & low-income clients.
• very small loan : unsalaried borrowers-collateral
• include group lending and liability
• pre-loan savings requirements
• gradually increasing loan sizes

3. Microfinance 0bjectives…
• low-income households‘: permanent access high quality
financial services
• to finance their income-producing activities, build assets
• stabilize consumption
• protect against risks
• not limited to credit, but include savings, insurance, and
money transfers.

4. Microfinance clients…
Poor & low-
Micro-
income
entrepreneurs
people
near the poverty
usually self-
line, both above
employed
and below
Women : majority
of clients.

5. Evolution of Micro finance in India
• Micro finance 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 Department.
• Nationalization of banks in 1969
• Regional Rural Banks created in 1975.
• established as an apex agency for rural finance in
1982.
• Passing of Mutually Aided Co-op. Act in AP in 1995.

6. THE STATUS OF MICRO FINANCE IN INDIA
• India’s population is more than 1.2 billion,
around 350 million, are living below the poverty
• About 56 % of the poor still borrow from
informal sources.
• 70 % of the rural poor do not have a deposit
account
• 87 % have no access to credit from formal
sources.
• Less than 15 % of the households have any kind
of insurance.
• Negligible numbers have access to health
insurance
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Source: Text

7. • Only 20% access loans from the formal sources, 80%
from informal sources
• Out of that 20% only 10% have access to micro finance
• Informal markets are very active and substantial –
money lenders have major share
• Interest rates in the informal markets are 5 to 15 times
more than formal institutions
• Formal Institutions has an approximate coverage of 1
per population of 7000
• Interest rates of Formal institutions are atleast 6 to
10% below market rates

8. SWOT analysis of MF
• Helped in reducing the poverty.
• Huge networking available
Strengths
• Not properly regulated.
• High number of people access to informal sources of finance.
Weakness • Concentrating on few people only and mainly in urban areas.
• Huge demand and supply gap.
• Employment Opportunity.
• Huge Untapped Market.
Opportunity • Opportunity for Pvt. Banks, NBFCs, Foreign Banks to enter this business segment.
• High Competition.
• Neophyte Industry.
Threats • Over involvement of Govt.

9. Top MF Institutions India
• Asmitha
• Grameen Foundation
• Hand in Hand
• Micro Credit India
• MYRADA
• SKS India
• Saadhana

10. PROJECTIONS FOR THE FUTURE
• Annual growth rate of about 20 % during the next five years.
• 75 % of the total poor households of 80 million (i.e. about 60 million
will be reached in the next five years.
Industry is expanding significantly
• MFIs popular among European pension and other institutional funds
• One of the few financial sectors not significantly affected by the
current recession
• Excellent diversification possibilities
• Way for the financial sector to 'redeem' itself
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11. Challenges
• lack of Appropriate legal structures for the structured growth of MF operations
•Finding adequate levels of equity for the new entities to leverage loan funds
•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.
•Appropriate loan products for different segments.

12. SHGs
• Self Help Groups consist of small homogeneous
groups usually 15 – 20 members
• Voluntarily formed for a specific purpose
• To save regular small sums of money, mutually
agreeing to contribute to a common fund to meet
their emergency needs on the basis of mutual
help
• They pool their resources to become financially
stable

13. Conditions for Membership for SHGs
• Members should be between the age group of
21-60 years
• From 1 family only 1 person can become a
member of an SHG (More families can join SHGs
this way)
• The group normally consists of either only men or
only women
• Members should be homogeneous (same social
and financial background)
• Members should be rural

14. Goals of SHGs
• Empowering women
• Developing leadership abilities among poor
people
• Increasing school enrolments
• Improving nutrition
• Use of birth control

15. Advantages of Financing through SHGs
• An economically poor individual gains strength
as part of a group
• Reduction in transaction costs for both lenders
and borrowers
• Lenders have to handle only a single SHG
account instead of a large number of small-
sized individual accounts
• borrowers as part of an SHG cut down
expenses on travel (to & from the branch and
other places) for completing paper work

16. Business model of GRAMEEN bank
 Introduction
• The Grameen Bank started in 1976 by the Nobel Laureate, Professor
Muhammad Yunus in Bangladesh .
• Grameen today has some 2,468 branches in Bangladesh, with a staff of
24,703 people serving 7.34 million borrowers from 80,257 villages.
• Grameen‘s methods are applied in 58 countries — including the United
States.
• Grameen Bank borrowers own 94% of the Bank. The remaining 6% are
owned by the government. (January 09)
 Working model of Grameen bank:
• Manager first makes a round to the appointed area to introduce Grameen
policies and programs.
• Try to make the group of 5 people.

17. Conti….
• Only two members can obtain loan at first. After 6 weeks of successful
repayment another two can apply for loan. The leader can only receive
loan at last.
• Repayment responsibility solely rests on the individual borrower.
• However if one member of a group defaults, that group will never receive a
loan from Grameen
 Two popular scheme by Grameen Bank is:-
• Loan Insurance:-
• Beggars Loan:-

18. Conti….
• The Repayment Mechanism:
• One year loan .
• Equal weekly installments .
• Repayment starts one week after the loan .
• Repayment amounts to 2% per week for fifty weeks .
• Criticism of Grameen Bank:
• There are rumors that there repayment rate are fake.
• Grameen Bank clients used their loans for many different purpose .e.g..Dowry,
gambling etc.

19. NABARD initiatives in Micro finance
• National Bank for Agriculture and Rural Development (NABARD)
was established as an apex rural development bank in the year 1982,
through an Act of Parliament.
• Role and Function of NABARD:
• Providing Refinance to lending institutions in rural areas.
• Evaluating, monitoring and inspecting the client banks.
• Providing support to NGOs through a variety of schemes.
• Making model projects / development schemes for banks and farmers
• It prepares, on annual basis, rural credit plans for all districts in the
country.

20.  Financial Santa Clause (NABARD)
• (NABARD) was established in 1982,with an initial capital of 1400 crores.
• And till March 30, 09 it reached to Rs 1, 00,000 crores with the surplus of Rs
1400 crores.
• Its Reserve and Surplus increased by 10.26% from 07 to 08, and its Cash and
Bank balance and Investment increased by 40.16% and 15.5%. (sources :nabard.org)
 From where NABARD gets the fund?
 How NABARD gives loan to the Institutions?
• NABARD follows the very strange way of providing the loans.
• They give loans to the every ODD number institution i.e.3, 5, 7, 9….