INDIA MICRO FINANCE

ALOK PRASAD

CEO

MICRO FINANCE INSTITUTIONS NETWORK (MFIN)

19th MARCH 2014

INDIA MICRO FINANCESTRAIGHT TALK!

2014 ASIA-PACIFIC FORUM ON FINANCIAL INCLUSIONSHANGHAI, CHINA

INDIAN BANKING & FINANCIAL INCLUSION

2

….. yet

Half the country does nothave bank accounts

(90% of the 100+ Million openedunder the FIP’s are dormant)

8% have access to bank creditfacilities

Plethora of Institutions & Policies

Commercial Banks

Public Banks

Private Banks

LABs

RRBs

BCs

DFIs

All India Finance Institutions

Specialized Financial Institutions

State Level Institutions

NBFC

NBFC MFIs

Co-operative Institutions

Urban Co-op Banks

Rural Co-Op Banks

Post Offices

MFI FINANCIAL INCLUSION PROGRAM BUSINESS

Microfinance India 3

Strong, Resilient and Growing, Profitably !

ArabianSea

Bayof

Bengal

Indian Ocean

Maharashtra

AndhraPradesh

Tamil Nadu

Odisha

Lakshadweep

Goa

Puducherry

Andaman

and

Nicobar

Islands

Madhya PradeshWestBengal

Bihar

Jharkhand

Uttar Pradesh

Uttarakhand

Assam

Arunachal

Pradesh

Nagaland

Manipur

MizoramTripura

Sikkim

Meghalaya

Rajasthan

Gujarat

Haryana

HimachalPradesh

Punjab

Delhi

Chandigarh

Jammu

andKashmir

Daman

and Diu

Dadra and Nagar Haveli

Map not to scale

> 3 mn 200k-300k

2 mn -3 mn 100k-200k

1.5 mn-2 mn 50k-100k

1 mn - 1.5 mn 25k-50k

0.5 mn - 1 mn 10k-25k

< 0.5 mn < 10k

PRICING & TRANSPARENCY


MFTransparency India Price Graph

Country APR Range (MFT data)

India 20% to 31%

Pakistan 04% to 51%

Philippines 12% to 143%

Tanzania 10% to 95%

Ethiopia 10% to 46%

Bolivia 07% to 69%

Ecuador 10% to 30%

(i) Dynamic Cap: - The average Base Rate of five largest commercial banks by assets multiplied by 2.75 per annum or cost of funds plus margin cap, whichever is less. The average of the Base Rate shall be advised by Reserve Bank of India.

(ii) Margin cap: Further, with effect from April 1, 2014, the margin cap shall not exceed 10 percent for MFIs having loan portfolio exceeding Rs.100 crore and 12 percent for others, as against 12 percent for all hitherto

PROVEN RESILIENCE AND PERFORMANCE


5.2

%

5.0

%

4.8

%

2.0

%

1.9

%

1.8

%

1.8

%

1.7

%

1.6

%

Total(all MFIs)

Total(all MFIs)

Total(all MFIs)

PAR 30 (%) PAR 90 (%) PAR 180 (%)

Q3 FY 12-13 Q2 FY 13-14 Q3 FY 13-14

4.7

4

1.7

9

3.8

5

5.1

5

5.3

9

2.1

6

4.6

5

5.8

2

5.6

5

2.5

8

4.8

4

6.0

7

Total(all MFIs)

MFIs(GLP < Rs 1 bn)

MFIs(GLP > Rs 1-5

bn)

MFIs(GLP > Rs 5 bn)

glp per loan officer (Rs mn)

Q3 FY 12-13 Q2 FY 13-14 Q3 FY 13-14

58

2

30

5

52

9

61

4

60

8

27

5

52

9

65

3

62

3

30

8

54

6

66

5

Total(all MFIs)

Other MFIs(GLP < Rs 1 bn)

Other MFIs(GLP > Rs 1-5 bn)

Other MFIs(GLP > Rs 5 bn)

clients per loan officer

Q2 FY 12-13 Q1 FY 13-14 Q2 FY 13-14

SELF REGULATION

YH Malegam Committee Report – Four Pillars of MFI regulation

“The second pillar is an association. Ifone third of MFIs become members ofan association, they (RBI) will recognizeit. The association will have its own codeof conduct. If discipline is not observed,the association, which will be somethinglike an SRO (self-regulatoryorganization), can remove that member,”

6

MFIN

SROPolicy Advocay & Development

Funtions

Compliance

– Corporate

Governance

– RBI Delegated

Role

– International Best

Practices

– Industry Code of

Conduct

Enforcement

– Monitoring

– Reporting

– Auditing

– Enforcement

– RBIndex

– Action

Policy

Advocacy

– RBI / Central Govt

engagement

– Policy Papers

– Industry

Representations

– Banker Meetings

– Communications

& stakeholder

management

Member Services

– Industry

Partnerships

Research, Training

& Knowledge

Worshops

– Credit Bureau

– Data Analytics

EXPECTATIONS FROM SRO

1. Exercise surveillance over the industry to ensure compliance with RBI’s regulatory prescriptions and industry code of conduct – with a dedicated Compliance Officer who will also have a direct reporting relationship with RBI

2. Have an Enforcement Committee

3. Have a Grievance Redressal mechanism primarily from the standpoint of clients – with a dedicated Grievance Redressal Nodal Officer

4. Have a dispute resolution mechanism

5. Conduct investigations into areas of concern as the RBI may require

6. Provide information / data to the RBI periodically or as request

7. Perform developmental functions through training and awareness programmes as also conduct research etc for the microfinance sector


THE LATEST : NACHIKET MOR COMMITTEE (2014)


Earlier Committees and Committees…..1. Narasimham Committee on Banking Sector Reforms,

1998

2. The Task Force on Supportive Policy and RegulatoryFramework for Microfinance (NABARD) 1999

3. Committee on Financial Inclusion (Dr. C. Rangarajan),2008

4. Report of the Committee on Financial Sector Reforms,2008 (Raghuram Rajan)

5. Report of the Committee on Customer Service in Banks,2010 (Damodaran)

6. RBI Sub-Committee of its Central Board of Directors tostudy Issues and concerns in the MFI sector, 2011 (Y.HMalegam)

7. Report of the Committee to re-examine the existingclassification and suggest revised guidelines with regardto Priority Sector Lending Classification and relatedissues, 2012 (M.V Nair)

Nachiket Mor Committee (2014)

Vision Statements (6 Goals)

1. Universal Electronic Bank Account (UEBA)

2. Ubiquitous Access to Payment Services andDeposit Products at Reasonable Charges withina fifteen minute walking distance of a paymentaccess point.

3. Sufficient Access to Affordable Formal Credit

4. Universal Access to a Range of Deposit andInvestment Products at Reasonable Charges

5. Universal Access to a Range of Insurance andRisk M.Products & Reasonable Charges

6. Right to Suitability

SMALL FINANCE BANKS – THE NEW THINKING

Three or Four large Indian banks with domestic and international presence

Several mid-sized banking institutions including niche banks with economy-wide presence

Old private sector banks, Regional Rural Banks, and multi state Urban Cooperative Banks

Small privately owned local banks and cooperative bank


Three Distinct School Of

Thoughts

Existing Institutions are enough,

they need to be overhauled

We need many, small, small

finance banks

We need many, large, 'small

finance' banks

INDIA NEEDS….THE 3 S


Scale

Specialization

Sustainability

MFIN VISION


“Help provide inclusive financial services to 100 million low income households by the year 2020, in

a responsible & transparent manner.”

THANK [email protected]

Documents

INDIA MICRO FINANCE