MICRO FINANCE REVOLUTION IN INDIA

Presented By: Nishant Bindra

P. Suraj

Vikas Kumar

Saurabh Mishra

Saurabh Agrawal

Himanshu Shekhar

WHAT IS MICRO FINANCE ??

• Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services.

• A world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers.

MICRO FINANCE IN INDIA Microfinance 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. NABARD established as an apex agency for rural finance in

1982.

OBJECTIVES : 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.

Microfinance clients…

Poor & low-income people

Usually self-employed

Micro-entrepreneurs

Near the poverty line, both above and below

Women : majority of clients.

Examples of Institutions delivering

microfinance in India?

SKS Microfinance Ltd (SKSMPL)

 Spandana Sphoorty Financial Ltd (SSFL)

 Asmitha Microfin Ltd (AML)

 Shri Kshetra Dharmasthala Rural Development Project(SKDRDP)

 Bhartiya Samruddhi Finance Limited (BSFL).

Legal forms of MFIs in IndiaNON PROFIT ORGANIZATIONS.

MUTUAL BENEFITS ORGANIZATIONS.

FOR PROFIT MFIs.

ISSUES AND CHALLENGES :

Literacy & Skill Levels of Clientele

High Transaction and Service Cost

Credit Risk

Skewed Regional Distribution of Microfinance

Diversion of Funds to Unproductive Activities

CONTD…. Regulatory Issues.

Irregular Flow of Income due to Seasonality.

Uncertainty of Market Conditions.

Lack of Tangible Proof for Assessment of Income.

Need for Information Sharing & Better Technology.

Facts about MFIs in India

30 percent of the world's microfinance borrowers are in India.

Largest microfinance market in the world.

Mostly in Southern part of India.Grown at an avg. rate of 80% over the

last 3 years.

The interest rate declared by the MFIs is different from the actual and indirect rate that includes hidden charges.

Cases of violation and harassment by MFIs in Andhra Pradesh.

Andhra government has introduced an ordinance for MFIs.

• Limit the interest rate that could be charged by MFIs.• MFIs  cannot extend a second loan unless the first loan

has been fully paid off.• MFIs will now be required to submit a monthly statement

to Registering Authority.

Shortcomings :Human resource capacity

Cost efficiency

Cost borrowing

Lack of regulations

Reaching remote areas

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.

The loan outstanding will consequently grow from the present level of about 1600 crores to about 42000 crores.

Thank you