1. Presented by,
Shivkumar Chaurasia, M. Sivaram, Susmita Layek,
Josephine Lotha, Vesuyi Tetseo, Vikrant Singh,
V. Quan
“Poor people are
like bonsai trees.
They could have
grown into giant
trees if they had
been supported by
the right
environment for
growth”
-Muhammad Yunus
(Founder of
Grameen Bank)

2.  What is Microfinance? (vikrant)
 Microfinance Institution: Overview (vexy)
 The contribution to rural economy (siva)
 Microfinance Institutions: Challenges (chaurasia)
 Potential solutions (susmita)
 Conclusion (josephine)
Please prepare the slides as per this division

3. “Microfinance is economic Development approach
that involves providing financial services through
institutions to low income clients”
Microfinance is a tool against poverty by enabling the
beneficiaries to:
 Create sustainable activities to increase their
income
 Reduce external shocks
 Improve the living conditions of entrepreneurs and
of their families
 Empower people and mainly the women

4.  India falls under low income class according to World Bank
 It is second populated country and 70% are in rural area
 60% of population on depends on agriculture but low
contribution to GDP ( 8% ) while per capita income is only $3262
 Result absolute poverty
 According to reserve Bank of India only 51% of the people
possess only 10% of the total asset of India
 Rural People have very low access to institutionalized credit in
India (Commercial Bank)

5. Microfinance institutions (MFIs) are the organisations or
associations of individuals that provide financial services to
the poor.
Institutional Arrangement for Microfinance Disbursement in India
Formal Institutions
Wholesale lenders like
NABARD, SIDBI, RMK, HDFC,
FWWB, HUDCO
Retail level Banks
-Commercial banks
-Regional Rural banks
-Cooperative Banks
SHGs
Individual
Informal Institutions
Lenders, Investors,
Donors
MFIS
-Non-Profit MFIs (NGOS)
-Co-operative MFIs
-Profit Making MFIs
(NBFC)
SHGs/JLGs
Individual

6.  A non-banking financial company (NBFC) is a company
registered under the Companies Act, 1956 and is engaged
in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by
government or local authority or other securities of like
marketable nature, leasing, hire-purchase, insurance
business, chit business, but does not include any
institution whose principal business is that of agriculture
activity, industrial activity, sale/purchase/construction of
immovable property.

7.  A NBFC cannot accept demand deposits
 It is not a part of payment or settlement system
and thus cannot issue cheques to the customer
 Deposit insurance facility of DICGC is not
available for NBFC depositors unlike in case of
banks

10.  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

11.  Credit Risk
 Market Risk
 Operational Risk
 Strategic Risk
Financial Risk
Non – Financial Risk

12.  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

13.  India’s achievement of the MDG of having 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