An overview of 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 and their activities.
 Status of Micro Finance.
Self Help Groups
Role of Banks to MFI’s
Problems in MFI’s
Solutions
Conclusion

3. INTRODUCTION
Provision of financial services 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 its large 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 And Their 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 In India

7. SELF HELP GROUPS(SHGs)
Major role 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

8. Self Help Groups
2009-10
2008-09
2007-08
2006-07
2005-06

9. Sources of capital and 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

10. Banks assistance to MFIs

11. Comparative Analysis of Micro finance services
offered to the poor:

12. Investment Credit - Refinance

13. The Problems of Mainstream 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 Alternative Micro-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 of the 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