Microfinance provides small, short-term loans, savings, insurance, and training opportunities to low-income groups without requiring collateral. Microfinance has existed informally for ages in India but legal frameworks and institutions like cooperatives, regional rural banks, NABARD, and microfinance institutions (MFIs) have expanded access. Currently, only 14% of the 32 crore Indians living below the poverty line have access to microfinance. Issues facing MFIs include high interest rates, over-lending, multiple borrowing, and coercive practices. Recent regulations have aimed to address these issues and expand microfinance's role in poverty alleviation.

1. Microfinance : An issue and future
PRESENTED BY :
SUDHIR KUMAR

2. What is Microfinance
CREDIT SAVING
INSURANCE
TRAINING

3. Evolution of microfinance in India
 Microfinance has been in practice for ages through informally
way.
 Legal framework fro establishing the co-operative movement
set up in 1904 .
 Reserve bank of India Act , 1934 provided the establishment
of the Agriculture Credit Department .
 Nationalization of banks in 1969 .
 Regional rural banks created in 1975.
 Set up of gamin bank in Bangladesh by Muhammad. Yunus in
1976.
 NABARD established as a apex body for rural finance in 1982
.

4. Scenario of Microfinance in India
 India population growth is more than 100 Crore , around 32
Crore are living below the poverty .
 only 20 % access loan from formal sources and 80 % from
informal sources .
 out of that 20% , only 14% have access to microfinance .
 During 2011-2012 ,the microfinance through MFI channel
has grown 16.25 % in 2012 in terms of client out reach and
13.75% in term of credit portfolio .
 Customers of microfinance are “ small and marginal
farmers”, “rural artisan and economically weaker sections” .

5. Salient feature of microfinance
 Borrowers are from the low income group.
 Loans are of small amount – micro loans.
 Short duration loans.
 Loans are offered without collaterals.
 High frequency of repayment.
 Loans are generally taken for income generation purpose.

6. Channels of Microfinance
1. SHG-Banking linkage programe (SBLP)
2. Microfinance institutions
SHG
BLP
Customer
MFIs

7. Issues of microfinance in India
 High rate of interest
 Lending for non productive purposes.
 Multiple borrowing and lending
 Ghost loans
 Coercive practices

8. Malegaon report on MFIs
 On the recommendation of Malegaon report , RBI put up a
regulation on MFIs , by put a cap on lending rate of MFIs at
26 % per annum and a margin cap of 12 % over cost of funds,
whichever is lower .
 In order to control overleveraging, RBI laid down rule that
only two MFIs lend to one borrower and both together cannot
provide loans beyond Rs50,000.
 For controlling coercive practices , RBI also set up a
grievance redressed machinery .

9. Problem face by MFI
 Financial illiteracy
 Managerial problems
 In ability to generate fund .
 Drop out and migration of Group members .

10. Future
 Legislation and regulation by RBI to a great extent addressed
the flaws in MFIs in India. It can play a big role in poverty
elevation , empowerment and sustainable development.

11. References :
file:///C:/Users/SCHOOL/Desktop/micro%20finance%20institution%20analysis%20in%20india.htm .
http://www.halfmantr.com/display-national-issues/955-microfinance-issues-and-future-in-india
http://www.thehindubusinessline.com/industry-and-economy/banking/the-future-of-microfinance-looks-pretty-
good-vijay-mahajan/article2430120.ece
file:///C:/Users/SCHOOL/Desktop/MicroFinance%20%E2%80%93%20Current%20Status%20and%20Growing%20
Concerns%20in%20India%C2%A0%20%C2%A0AvantGarde.htm
file:///C:/Users/SCHOOL/Desktop/micro%20finance%20institution%20analysis%20in%20india.htm