³A STUDY ON
SUSTAINABLITY OF SMALL MICROFINANACE INSTITUTIONS´
SUBMITTED TO: PROF. RANJANI SRINIVASAN SUBMITTED BY: ANKIT PATEL
A PROJECT REPORT ON ³SUSTAINABLITY OF SMALL
By ANKIT PATEL (MOOO18)
Microfinance has received increasing attention in many discussions about the never ending problems of poverty and economic growth promotion. The role of microfinance institutions (MFI) assumed increased importance after the financial crisis in the USA. Microfinance has demonstrated that poor people are viable customers as long as their financing is approached in a right was such that moral hazard, adverse selection and other agency problems are mitigated. Microfinance development led to a number of strong institutions focusing on poor people¶s finance and it begun to attract the interest of private investors. But despite these achievements, there is still a long way to go to extend access to all who need financial services. Following this point of view, we first describe the position of MFI, products and services in modern microfinance and their position in developing countries. After this exposition we concentrate on role and performance of MFIs worldwide in the light of financial and economic crisis in recent years. Robinson defines Microfinance as small-scale financial services for both credits and deposits that are provided to people who farm or fish or herd; operate small or micro enterprises where goods are produced, recycled, repaired or traded; provide services; work for wages or commissions; gain income from renting out small amounts of land, vehicles, draft animals, or machinery and tools; and to other individuals and local groups in developing countries, in both rural and urban areas. Subsidized credit has long been believed to be the panacea for the eradication of poverty for decades now. But perhaps the only thing subsidized credit could create was Non Performing Assets (NPAs). The realization that the core issue for the poor was access to credit rather than the cost of credit came very late. Microfinance is often credited with putting an end to the interest rate debate for the poor. A host of players have entered microfinance space, each having a reason of its own. It is believed that, Microfinance, unlike other developmental efforts, gives quick and tangible results. Many NGOs that were early entrants gradually metamorphosed into full fledged lenders, developmental professionals left their cushy careers to set up microfinance firms. Even many banks have experimented with working exclusively with self help groups and therefore have .microfinance branches.
In other words. healthcare and empowerment. commercial banks. The theory is that if the poor have access to these services. According to Forbes. and cooperatives (see examples) Semi-formal Microfinance Institutions nongovernmental organizations
.WHAT IS MICROFINANCE?
As the name suggests. allowing them to plan and improve their livelihoods through education. such as businesses with low or moderate incomes. their financial lives will be more stable. telecom firms. while micro entrepreneurs use these services. microfinance converts poverty into an economic opportunity that evades the idea of exploitation.000 y Payment services y Money transfers y Insurance to poor and low-income households and their micro-enterprises Microfinance Institutions (MFIs) provide micro services through a variety of lending models.
WHAT ARE THE SOURCES OF MICROFINANCE?
y Microfinance providers come in various forms which can be broadly grouped as follows: y Formal Microfinance Institutions ± rural/microfinance/village banks. predictable and secure. but you can read more meticulous definitions here and here. microfinance is probably the best known means of helping small business owners in developing countries move out of poverty. microfinance is the field of offering financial services to people on a small (micro) scale. such as: y Deposits y Finance schemes or micro loans up to $3.The definition for according to The Asian Development Bank (ADB) is any financial service targeted toward the poor.
The frames of reference in banker s definitions are therefore. This definition adopts the bankers perspective and sticks to accounting approach of sustainability. his performance assessment criteria for the financial viability of any microfinance related financial institution are: repayment rate. Shah (1999) adopts for an integrated approach in defining the term sustainability as the accounting approach to sustainability that takes into account the financial aspect of the institution is too narrow for him. From banker s perspective. and demand driven rural credit system in which farmers themselves demand the loans for their project. Therefore.SUSTAINABILITY: SOME DEFINITIONS
From bankers perspective. For Shah. amongst other criteria. a microfinance institution is said to have reached sustainability when the operating income from the loan is sufficient to cover all the operating costs. sustainability of microfinance institution includes both financial viability and institutional sustainability (self-sufficiency) of the lending institution (Sharma and Nepal. more financial. However.obtaining funds at market rate and mobilization of local resources. operating cost ratio. market interest rates. . the concept of sustainability includes. portfolio quality. administrative and institution focused. 1997).
credit unions and other financial cooperatives.
CREDIT DELIVERY METHODOLOGIES USED BY MICROFINANCE INSTITUTIONS
MFI¶s use two basic methods in delivering financial services to their clients. The advantage of group methodology is that Groups are trained to own joint responsibility for loans that are taken by individuals in the group. For-profit MFIs may be organized as non-bank financial institutions (NBFIs). and state-owned development and postal savings banks. often because it is a requirement to obtaining a license from banking authorities to offer savings services. Group becomes a basic unit with which MFIs deal. even though only a portion of their assets may be committed to financial services to the poor. Commercial and government-owned banks that offer microfinance services are frequently referred to as MFIs. or microfinance departments of full-service banks. commercial banks that specialize in microfinance. As we have discussed earlier.
. An increasing number of MFIs are now organized as for-profit entities. group methodologies help in creating social collateral (peer pressure) that can effectively substitute physical collateral. Group method primarily involves a group of individuals. which becomes the basic unit of operation for the MFIs. MFIs have to provide collateral free loans. Some MFIs provide non-financial products.MICROFINANCE INSTITUTIONS (MFIs) Most MFIs started as not-for-profit organizations like NGOs (non-governmental organizations). These are: (1) Group Method (2) Individual method
This is one of the most common methodologies for providing micro-finance. such as business development or health services.
Group may have to jointly own the responsibility of defaults and pay on behalf of defaulting client. the clients that the MFIs are dealing with are generally poor and may face genuine problems at times. The advantage of Group methodology can easily be appreciated by the fact if the a MFI employee has to visit each individual house in isolation. Group methodology creates a forum where individuals come and discuss. Moreover. Groups methodology also helps in controlling cost This ensures that even without taking any physical collateral. Group methodology is also important because in case of larger loan defaults a financial institutions can take recourse o legal action but in small loans legal recourse is not an economically sound option. and exert social pressure. Rather than taking an aggressive/legal approach. Groups ensure repayments from all individuals in that group and incase of a default Groups functions as the forum where the credit discipline and other related issues are discussed. can provide opinion. This helps the MFI in increasing the efficiency of staff and controlling the cost. which such vulnerable clients it is always better to have more constructive and collective approach. MFIs actually deliver the financial service at the client¶s location which could be a village in rural areas or a colony/slum in urban area. Also in the absence of a group. Having a group helps the MFIs in getting all clients at one spot rather than visiting each individual¶s house.000 at default cannot apply legal pressure as the cost of recovery through that method can be higher than the amount to be recovered itself. An MFI who may have an outstanding or Rs 3. which is provided by the Groups.
. Group also help credit appraisal and provide opinion on creditworthiness of each individual in the group. if a client refuses to pay there is no forum where such a case can be discussed or there is no method through which the MFI can expert pressure on the client. it would be very difficult. the MFI is able to manage its credit risk (loan related risk).
(ii) SHGs are social intermediaries: SHGs do not restrict their functions only to financial transactions.Due to the various advantages.
. Self-help Group and Joint Liability Groups (Grameen model and its variants) are two common credit delivery models in India. as indicated above provided by groups. These are simple books to keep records of their savings. against women. or even a mixed Group. SHGs are now considered to be very important bodies in rural development and are therefore found in almost all parts of the country and their number is still rapidly growing. preferably from the same socio-economic background. There are example where SHGs have taken up social issues and fought against social evils like alcoholism. SELF ±HELP GROUPS (SHGS) Self-help Group concept has its origin in India. SHGs are formed by Non-Government Organisations as well as Government agencies and are used as channels for various development programmes. A Self-Help Group is an association of generally up to 20 members (not exceeding 20 members). due to the presence of conflicting interests. this methodology is widely accepted and used in micro-finance across the world. Mixed group is not preferred in many of the places. it has been the experience that women¶s groups perform better in all the important activities of SHGs. SHGs are facilitated by Government agencies or NGOs for members to come together for discussing and solving their common problems either financial or social through mutual help. Strong SHGs also make their Balance sheets and Income statements. They are elected by the group. (iv) Have office bearers: SHGs gave a structure where there is a Group President. An SHG can be all-women group. (iii) Books of accounts: SHGs maintain their own books of accounts. dowry. SHGs can open bank accounts in the name of SHG. loans income and expenditures. violence. getting into village politics and being elected as Sarpanch. SHGs are often involved in many social activities. Secretary and Treasure. They can also receive government grants and funds for development activities. all-men group. However.
Some of the distinct features of SHGs are
(i) Recognized by government: SHGs are well recognized and accepted by government.
Muhammad Yunus. Meetings also take place only at the Central level and individual groups do not meet. as mentioned. Center is the operational unit for the MFI. is a joint liability group model. SHGs are also involved in various social issues. It is the brainchild of Prof. founder of Grameen Bank in Bangladesh. Here five-member groups are formed and eight such groups form a Center.. Grameen model is the most accepted and prevalent micro-finance delivery model in the world today. We see that SHGs are groups. which are more autonomous. If Group members are unable to do it. which means that MFI deals with a Center as a whole. over the years people have experimented with Centers of different sizes and now there are variations of 5-8 groups within a Center. in a full-capacity Center there are 40 members (8 x 5). Group meetings take place only in front of the Field staff of the MFI. The Federations are able to channelise funds to the SHGs and also help in improving the managing and financial skills of SHGs. JOINT LIABILITY GROUP ± GRAMEEN MODEL Grameen model is based on the concept of joint liability. The Group and Center are Joint liability Groups. Hence. their role is not just restricted to it.(v) SHGs are more autonomous as they decide their own rules and regulations. Some other features of Grammen Model are:
. While they are involved in financial transactions. MFI recovers full money from Center. Center as whole has to contribute and share the responsibility. A Grameen model is focused on financial transactions and other social issues are generally not discussed. As more SHGs are formed they have started federating themselves into clusters and clusters in turn as SHG Federations. Many MFIs have accepted the model as it has high focus on standardization and discipline Grameen model. if any member has defaulted: the group members have to pool in money to repay to the MFI. (vii) SHGs can hold bank account and can also borrow from banks and other financial institutions. which means that all members are jointly responsible (µliable¶) for the repayment. (vi) SHGs mobilize thrift and rotate it internally. However.
In flat rate system installment size of repayment remains small for all weeks and hence is convenient and easier to explain. form JLGs of five-members.(i) The group meeting take place every week (ii) Interest rate are charged on flat basis (iii) MFI staff conducts the meeting (iv) All transactions take place only in Center meetings Grameen model is focused on providing financial services to the clients and hence there is an emphasis on standardization and discipline.
. JOINT LIABILITY GROUPS (JLG) Grameen model is a particular form of joint liability Group but in India there are other forms of Joint liability Groups as well. These forms of JLGs are somewhere between Group and Individual lending methods. The meetings are conducted for carrying out the financial transactions only. these JLGs do not meet. They share responsibility (³liability´) and stand as guarantee for each other. it is easy to break the loan installment into the principal and interest component. Typically members are shopkeepers from same locality. There is a Group Leader in such JLGs. many MFIs prefer such group in urban business areas. These are group of individuals coming together to borrow from the financial institution. While Grameen model is specifically focused on providing financial services to the low-income clients. We see that the SHG and Grameen model have originated with two different approaches. Flat interest is charged again for making the system standardized. As in urban areas shopkeepers do not have time to hold meeting. Also. generally from the Group leader rather than going to each individual. While lending in such JLGs is to individual members small JLGs still provide some sort of comfort to the MFIs. MFIs. The meetings are conducted systematically in a short-time and other social issues are not discussed. Such JLGs do not hold periodic meetings. Also collection can be done from a single point. particularly in urban areas. SHG model has been developed with holistic view of development and empowerment of society where financial transactions are only one part of it. The model suggests weekly meeting for frequent interaction with the clients to reduce credit risk.
theft. In Individual lending method. However. A harsh aspect of poverty is that income is often irregular and undependable.INDIVIDUAL METHOD
So far we have discussed the Group based lending method.
IMPACT OF MICROFINANCE
The impact of microcredit has been studied more than the impact of other forms of microfinance. or education is lost. Individual lending is more prevalent with clients who generally need bigger size loans and have the capacity to produce guarantee and generate enough comfort to the MFI. which should yield a more definitive picture. MFIs provide loans to an individual based on his/her own personal credit worthiness. The poor use credit to build assets such as buying land. Most impact studies to date have found significant benefits from microcredit. many studies would not be regarded as meaningful by most professional econometricians. Access to credit helps the poor to smooth cash flows and avoid periods where access to food. Microcredit can provide a range of benefits that poor households highly value including long-term increases in income and consumption. which gives them future security. or natural disasters. MFIs also ask for individual guarantors or take post-dated cheques from clients. client¶s income sources and business position. Credit can make it easier to manage shocks like sickness of a wage earner. only a few studies have made serious efforts to compensate for the methodological challenges. should the borrower fail to do so. However MFIs are also increasingly providing loans to individuals. A new wave of randomized trial studies is now in process. In fact. Individual guarantors come from friends or relatives well known to the borrower and who are ready to take liability of repaying the loan. then MFIs may also take some collateral security. Empirical studies on the impact of credit are difficult and expensive to conduct and pose special methodological problems. shelter. clothing. If the loan is significantly larger. Women participants in microcredit programs often experience important selfempowerment.
. his/her reputation among peers and society. MFIs generally base their decision on personal knowledge of the client.
It takes a lot less staff time to make a single loan of $100. They faithfully repay their loans even when the only compelling reason is to ensure continued access to the service in the future. MFIs may operate in areas that are remote or have low population density. administrative costs usually drop as managers learn from experience and in some cases because competition forces lower pricing and greater efficiency. If an MFI wants to operate sustainably. These decisions require substantial intervention of a loan officer in judging the risk of each loan.000 than 1. Credit decisions for borrowers who have neither collateral nor a salary cannot be based on automated scoring. The issue is cost: the administrative cost of making tiny loans is much higher in percentage terms than the cost of making a large loan. inefficient operations can make them higher than necessary.
ISSUE OF INTEREST RATES ON LOANS TO THE POOR
Concerns often arise as to why microcredit interest rates are higher than the bank interest rates that wealthier people pay. As the microcredit market matures in a given country. Besides loan size. Other microfinance services like savings. and money transfers have developed more recently. there is a strong indication from borrowers that microcredit improves their lives. other factors can make microcredit more expensive to deliver. MFIs that offer good voluntary savings services typically attract far more savers than borrowers. and there is less empirical research on their impact.000 loans of $100 each.
. Although microcredit interest rates can be legitimately high. making lending more expensive. it has to price its loans high enough to cover all its costs. Client demand indicates that poor people value such services. This is often why traditional banks tend to stay away from such areas. insurance.Even so.
unlike microfinance.e. Sustainable MFIs have the potential to attract non-subsidized resources to finance expansion of outreach. reach a limited number of clients. then more than 3/5 of the borrowers are already being served profitably. cannot be delivered without continuing subsidies. MFIs fund their assets with more of their own money and less of the money deposited by savers. Most MFIs are still unprofitable. Rather. If one narrows the focus to private MFIs such as NGOs and licensed institutions. Moreover. The trade-off between financial viability and reaching very poor people is much less acute than many once thought. MFIs are on average more profitable than the commercial banks in their countries. it would be better spent on other development priorities that. MFIs are on the average less profitable than banks. correlation between MFI profitability and client poverty level has proven to be a statistically weak one. MFIs may only operate for a limited time.. This does not show that microfinance is inherently more profitable than commercial banking. Even so. or be driven more by political goals than by client needs if services are not priced at sustainable levels. 44% of all microborrowers captured by the MIX database) were being served by profitable institutions. A number of financial providers have managed to offer high-quality financial services to very poor people while also covering their costs. In 2006. A more meaningful way to look at profitability is to consider the overall number of clients served by profitable MFIs. well-managed
.MICROFINANCE & SUSTAINABILITY
Financial sustainability is a tool for reaching the maximum number of clients. Even if there were enough donor and government money. and the longterm trend is upward. Donors and governments cannot provide enough subsidized funds to meet the huge demand for microfinance. the differential is likely due to microfinance being an immature industry in most countries where providers¶ profits have not yet been squeezed down. but this is mainly because MFIs are not yet as fully leveraged as banks²i. rather than the number of profitable MFIs themselves. Experience has even shown that borrowers are more likely to repay lenders who operate without subsidies at they are more confident the institution will be around to give them future loans. This may be more driven by the vision of particular MFIs than by any inherent unprofitability of low-end microcredit. Measured by return on the equity invested by shareholders.
It is desirable to build a strong demand system in the form of community-based development financial institutions (CDFIs).
TRACK APPROACH FOR BUILDING A SUSTAINABLE MICROFINANCE SECTOR (MFS) IN INDIA
There is a huge unmet demand for micro-finance. commercial banks. but not actually companies under the Companies Act are not allowed to take deposits. with a lower start up equity of Rs 50 million. and NBFCs) to enter the microfinance sector as a serious business proposition. · Encouraging new microfinance institutions (MFIs) with a supportive policy and regulatory framework and financial resources to enlarge and expand their services. such as NABARD. SIDBI and HUDCO. Such a system is required to convert latent demand into effective
. has not yet been operationalised by the RBI. There is a need to adopt a three track approach. which discourage mainstream FIs from increasing outreach and achieving sustainability in microfinance. Track 3 is grassroots up. and thus their source of funds is the owners¶ personal funds and borrowings from relatives. To incorporate. at the moment there are only two options ± either be a co-operative or be an NBFC (nonbanking finance company). insurance companies. with the help of NGOs and others. The private finance ³companies´ ± so called. These constraints apply both to mainstream FIs (track 1) and The concept of Local Area Banks (LABs). Bridging the demand supply gap requires an environment that attracts large numbers of microfinance providers. cooperatives. · Building a strong demand system in the form of community-based development financial institutions (CDFIs).microfinance have already shown to be profitable enough to integrate into mainstream financial sectors. with the help of NGOs and others. using mutually complementary strategies: · Incentivising existing mainstream financial service providers (apex financial institutions. Further growth in microfinance can only be possible by redressing these limitations in the legal and regulatory framework. There are many aspects of the existing legal and regulatory framework.
there are multiple dimensions of sustainability. Even though the unmet demand is large. We have to look at sustainability from the point of view of: y Demand and Supply Characteristics and Their Impact on Sustainability of MFIs y Sustainability of the Mission of MFIs y Legal and Regulatory Framework for Promoting Sustainability of MFIs y Ownership and Governance to Promote Sustainability of MFIs y Financial Sustainability of MFIs
DEMAND AND SUPPLY CHARACTERISTICS AND THEIR IMPACT ON SUSTAINABILITY
Demand for Microfinance Services: The demand for microfinance services ± savings.demand. The current annual credit usage by these households was estimated in 1998 to be Rs 4. Thus.000 million or US$ 11 billion. we focus on track 2 (MFIs).
MULTIPLE DIMENSIONS OF SUSTAINABILITY Sustainability is not just financial.65. restore the repayment norm. credit and insurance ± is apparently insatiable in India. approximately 75 million households need micro-finance. as other presenters from India will be dealing with track 1 (mainstream FIs) and track 3 (CDFIs). In that sense. India has nearly 400 million people below or just above an austerely defined poverty line. wean away microfinance customers from moneylenders. nearly 60 million households are in rural India and the remaining 15 million are urban slum dwellers. Credit: With a population of 1000 million. remove the expectation of low interest rate and capital subsidies that have spoiled borrowers over the years. Having explained the three tracks for building the microfinance sector in India. the emerging ³competition´ from mainstream banks can overwhelm MFIs. which are still in
. India is perhaps the largest emerging market for microfinance services. and build local stake in grassroots financial structures. Of these.
theft. The supply of insurance services to the poor has increased substantially over the 1990s.000 million worth of funds. etc. also led to legitimate MFIs being not allowed to take deposits and thus provide savings services to the poor. which is not even 0. while banks have provided access to a large number of small depositors. By March 31. In order to make MFIs sustainable. comprising nearly 33000 SHGs all over India. and there are a large number of low premium schemes covering them against death. This is so as banks are able to cross-subsidize their microcredit. the demand is nowhere near being met. accidents. the characteristics of demand need to be modified to ensure that diffused demand gets consolidated (such as by organising borrowers into SHGs) and users become willing to pay full costs of services (at efficiency levels). we see that there is no authoritative countrywide estimate of microcredit disbursed or clients served. there is an unfulfilled demand for savings and insurance services. In the case of savings services. and loss of assets due to fire. NABARD has established a goal to help promote 1 million SHGs by 2008 AD. and charge interest rates below cost and can out-price any MFI.3 percent of the existing credit usage by poor families. To meet this goal. 1999.
The Supply of Microfinance Services and Competition for MFIs
The total outreach of the existing specialized microfinance service providers is quite limited. obviously. banks have cumulatively financed Rs 570 million. perversely. natural calamities. the banking system has to cooperate with NABARD in an unprecedented big way. Starting with credit first. One million SHGs will absorb at least Rs 50. The total barely crosses Rs 1500 million.
. but this has. This has major implications for the sustainability of MFIs. Thus MFI try to simultaneously achieve the twin goal of access (by the poor) and sustainability (of the institution). The Reserve Bank of India (RBI) has tightened up deposit taking activity since 1997.
Sustainability of Mission
MFIs are usually established to fulfil a mission ± of reaching credit and financial services to the poor who are otherwise unreached by mainstream FIs.their nascent stage. We have attempted a preliminary estimate in Appendix 1. Savings and Insurance: Apart from credit.
are minimised. Yet. though it is possible to have a looser or tighter governance within the same type of entity. volume of credit and channel of lending. which are legally not ³owned´ by anyone. a vast majority of MFIs in India are non-profit NGOs. of member-users (as in cooperatives). There is also restriction on the usage. most Indian MFIs are NGOs.
.LEGAL AND REGULATORY FRAMEWORK TO PROMOTE SUSTAINABILITY OF MFIS
Regulation helps in long term sustainability. Various actions and announcements of the GoI and the RBI are indicative of the acceptance and recognition of the role of NGOMFIs as part of the micro-finance sector. under the Societies Registration Act.
Ownership and Governance to Promote Sustainability of MFIs
The pattern of ownership of MFIs and good governance are crucial to their sustainability. Regulation and supervision ensure that MFIs are run prudently and cases of poor people losing their money due to fraud or incompetence. There is an absence of a supportive framework for encouraging entrepreneurs to provide micro-finance services on a for-profit basis. or of investors (as in companies). Accountability is structurally limited in case of these legal forms.
Ownership of MFIs
As stated earlier. this will have to change if sustainable MFIs have to be established in large numbers. the concept is looked at a bit suspiciously both within the sector and by policy makers. 1860 or the Indian Trust Acts. Indeed. At present. Each ownership pattern has its problems and plus points. NGO-MFIs are registered as Societies or Trusts. even though MFIs may chafe under it in the initial years. Governance structures emanate from the ownership pattern. Ownership can be of no one (as in NGOs). 1882. and thus not treated as part of the mainstream financial sector.
governance is likely to vest with professionals. first and foremost. whether of NGOs or cooperatives. FINANCIAL SUSTAINABILITY
The key to MFI financial sustainability is by controlling costs and bad debts. The microfinance sector in India at present badly needs a large number of microfinance entrepreneurs (MFEs). MFIs need. MFIs should: · Control costs by reducing average cost of funds.
Human Resources Human resources are the key to the long run sustainability of any organisation as they are the ones who bring difference in the manner MFIs operate and function. increasing volumes and by offering other financial services such as savings and insurance. Interested readers may want to look at the main paper for details. those who will establish them. Most Indian MFIs are not yet financially sustainable. who can set up new MFIs. that is. the Micro-Finance Entrepreneurs (MFEs). cost of operations and cost of bad debts. since the other option is to depend on exceptional charismatic leaders.
. Is institutional sustainability possible only in a model where the MFI is managed by professionals? It appears so. In order to achieve financial sustainability. · Increase volumes · Increase services ± savings and insurance
Suggestions for Building Sustainable MFIs In India
Recommendations have been suggested for establishing an enabling environment to promote sustainable MFIs in India.Governance One has to accept the fact that as MFIs grow larger. A systematic process for identifying and nurturing MFEs is required.
they can be 10 ± 25 % of the sum of credits advanced by MFI2. The most of MFIs are financed externally by international organizations. MICROCREDIT
Micro-credit is defined as a credit (small amounts) provided to very poor. built on regular. (Robinson. fixed small installments starting very early after contract is signed. who operate small enterprises or microenterprises where goods are produced. The interest earnings should cover the probability of default.
THE NATURE OF MICROFINANCE: MICROFINANCE VS. The system of installments. or sold. inflation and mainly the administrative costs. is less encumbering for clients but is more exacting from administrative aspect . Simplify foreign investment regulations to enable MFIs to raise foreign equity. The interest rate of microcredits seems to be very high in comparison with standard bank loans in developed part of the world. both rural and urban. repaired. 2001). Thus. who provide services. What is microfinance? Microfinance refers to small-scale financial services ± primarily credit and savings ± provided to people who farm or fish or herd. recycled. NGOs or the state budgets ± the measure of dependence on this revenue and self-sustainability should be the talking point in following sections.Need to Enact/ Amend Laws and Regulations
y y y y y y y y y Amend the RBI Act. who work for wages or commissions. and to other individuals and groups at the local levels of developing countries. often unemployed people without any collateral. The amount of credit is smaller and the credit cycle is shorter than standard loans of commercial institutions ± typically from six to twelve months with weekly or fortnightly installments. vehicles. or machinery and tools. draft animals. to help them live better1. who gain income from renting out small amounts of land. Just small credits can help these people to repay their previous loans and start their own new business. SIDBI and HUDCO Changes in the Income Tax Act Tax benefits need to be extended to the microfinance sector Allow NGOs to give foreign grants as loans and grants to SHGs/CDFIs. 1934 to add a chapter on MFIs Establishing a new form of NBFC ± the Micro Finance Company Permitting MFIs to take deposits from members/borrowers Changing priority sector guidelines Changes in the Acts governing NABARD. the broader
Watetip. the poor can face an investment opportunity such as buying land or other productive assets or setting up a new business. the training is a central part of the provision of credit. the education of children. 2006). floods or other natural disasters. Chytilova. Very poor people spend surprisingly lot for various festivals (Banerjee and Duflo. The courses for dressmakers are very common. For example in organizations as Pro Mujer and Freedom from Hunger. After successfully passing the course. which can be offered to the poor.mostly of children: the nutritious foods to feed children.definition of microfinance includes not only microcredits but also other financial services. The training needs to be focused not only on business or technical skills. 1996). Lassen and Dunford. women can ask for credit on the sewing machine. The most of MFIs connect their credit services also with educational or saving programs or business trainings. the importance of breast feeding or how to treat a child with diarrhea (McNelly. credit cooperatives or Rotating Savings and Credit Associations (ROSCA). From time to time they need also bigger amounts necessitated by different situations. Another situation can be unpredictable like emergency cases such as a sudden sickness and injury or wars. For these cases people should have some savings. they try to make use of other non-official ways like deposit collectors. retraining scheme or technical trainings. Here is a place for another innovative component of microfinance ± microsavings
. but poor people have difficulties to save in traditional institutions or at home. 2008). but also for better knowledge of proper nourishment . Logically the investments can be more profitable when the people have access to training. Morduch. Finally yet importantly. Various researches found that the poor do not have all the expenditures in small sums like for clothing and food. In these days we can include also improvement in health care and infrastructure to the system of microfinance. thus. which can improve their skills. home building and festivals. The costs of these programs obviously increase the interest rates but the gains for both the borrowers and MFIs outweigh them. Interested economists found soon that not only small credits but also other services connected with lending could improve economic lives of the poorest (Bauer. Some can be predictable like a dowry.
the revolutionary progress was initiated in 1976 by Muhammad Yunus. housing and education for their families. including savings. With a simple system of small and frequent payments and minimal paperwork. Although the history of microfinance could be divided into several pivotal parts. in the village close to Chittagong University. money transfers and insurance) to the enormous challenge of building inclusive financial systems. women tend to spend their own earnings on better nutrition. micro credit program has found that women are more likely to repay their loans and in general are more reliable borrowers. This brings long-term benefits to the community. This economic professor and successful founder of the Grameen Bank of Bangladesh started out by loaning 28 USD for working capital to a group of petty traders and crafts people.BRIEF HISTORY OF MFIS
Over the past 10 years or so. given that microcredit s purpose is primarily social. mostly women.
. cutting into the cycle of chronic poverty and dependency. microfinance has rapidly evolved and expanded from the relatively narrow field of micro enterprise credit to the more comprehensive concept of microfinance (which includes a range of financial services for poor people. the women paid back their loans in full and on time. In addition. A recent World Bank study shows that wage levels are higher in the villages served by Grameen and that the health. But more importantly. education and self-esteem of its borrowers and their families are significantly improved.
Such needs can be met by using the typologies of financial services that are typically considered in the studies of financial intermediation: credit products ± the most common credit products in microfinance are microcredit and microleasing. c) saving and liquidity needs or d) risk hedging. All the victims of financial exclusion have now been added to the traditional target beneficiaries. the poor and women. In the past decades microcredit projects have assumed wider features than their original ones. there are now industrialized countries with high levels of financial exclusion. a limited number of MFIs have begun to offer payment services also. in fact. From this perspective. 2003). do not only need productive loans: they need further financial services in order to meet other specific needs. who have mainly benefited from small loans used to finance their cash flow. The demand for such services mainly derives from those categories of clients that have a greater managerial ability and those need to perform transactions through alternative means to cash ± often associated with
. Another essential financial service presents so-called payment services ± alongside savings and loan products. it is then possible to distinguish between the following needs: a) Medium and long term funding needs (circulating and fixed capital). The step from microcredit to microfinance requires the effort of reconsideration of the business models and the distribution methodology of financial services. b)Access to safe. in addition to the non-profit institutions there are an ever-increasing number of traditional credit intermediaries. the need for insurance services to deal with shock or emergency situations. In modern microfinance the poorest of the poor is no longer the only client. Examples are the demand for credit or savings in order to provide education for their children. These are included in a category of financial services that the poor request in order to have the possibility of transferring money through secure channels. In addition to developing countries. The poor. the requirement for savings and insurance services to meet the costs of old age and funeral services. The beneficiaries of microcredit have typically been the poorest of the poor . It is not by chance that many authors define the current period as the financial services era and underline how the recent consideration of the variety of new financial services motivates the knowledge of an increasing complexity and variety of needs of low income clients (Rutherford. fast and cheap payment systems.PRODUCTS AND SERVICES IN MODERN MICROFINANCE For a long time the offer of financial services to low-income clients meant the granting of microloans to develop microbusinesses.
in developed countries this is limited to insurance companies or to financial intermediaries used to managing a single portfolio of numerous. . so far. this being due to an unfavorable legal and regulatory context and/or the inability of many MFIs to define and successfully manage microinsurance schemes. are all events that can be dealt with by microfinance. Microinsurance products. that microinsurance is not always the best solution for reducing the vulnerability of the poor to risks and for improving the quality of the loan portfolio. Insurance is a high risk business. availability and accessibility to payment instruments. many MFIs operate at the limits of legality.. offering insurance products directly involves incurring greater risks. Finally. A.
. Last group are insurance products ± the demand for health and loan insurance derives from the need of low-income customers to limit and cover the risks in case of death or loss of assets. It is necessary to point out. without having to spend time and resources in the design phase of the product. G. especially if the insurance side of the business is not separate from the savings and credit side. bank transfers and credit/debit cards. 2006). the MFIs that offer payment services are not. fast and cheap settlement. These partnerships present various advantages for formal insurers as well as for MFIs. represent a fundamental instrument in microfinance.. M. health problems of the beneficiary or death of livestock. given the vulnerability of the poor to risk. Recently some MFIs have begun to offer credit cards. similar. rather than offering microinsurance products directly. the MFIs can incur more moral hazard problems (Torre La. On the other hand. In developing countries. These aspects show how it is very often advisable to create partnerships with formal insurance providers. Overall the demand for payment services arises ± considering the necessary exceptions ± through the specific needs of banking clients: safety. debit cards and smart cards.Vento. do find in insurance cover an important management solution. risks. directly offering insurance products requires different skills from those required for credit or saving supply.deposit products ± such as cheques. drawn up to reduce uncertainty and its effects. MFIs can benefit from the expertise of formal institutions in defining client responsive products. The insurers can gain access to new markets. Furthermore. Natural disasters. On the other hand. numerous because of the complexity of the infrastructure and the technology that payment systems require.
And there are many logical reasons why they do not do that. For the understanding of their functions and operations.
Semi-formal institutions are usually registered entities. In addition. no addresses. which banks require. as is the case with postal
... their position in the finance services sector in the developing countries has to be explained first. the potential of credit markets in developing countries is high.MICROFINANCE INSTITUTIONS FINANCIAL SERVICE
Microfinance institutions originated in developing economies. Despite these facts. Ghana. Potential entrepreneurs are usually missing starting seed capital. They can be defined as microfinance financial intermediaries (MFFIs) and they represent the most traditional category of MFI: they are mostly credit-only institutions which provide various financial services but generally. They are providers of microfinance services on a voluntary basis and are not subject to any kind of control or regulation. credit associations. subject to all relevant general laws. The other source of finance is represented by microfinance institutions which could be classified into three main categories. individual money lenders) properly do not have the status of institutions. they do not have steady employment and cannot offer any collateral. The poor have no or very little income. the loans are generally far too small compared to transaction costs (bad information. but returns on certain small businesses are fairly high. These institutions never (or hardly ever) provide financial services to the poor clients. families. they do not collect deposits or alternatively they cannot grant credit. According to empirical evidence. Kenya). banks are too far away to verify and observe their behavior ± there is little information. The most obvious group of finance providers both in developed and developing countries is represented by well-known traditional banks. no infrastructure. annual returns on investments in microenterprises often exceed 100 percent too. The returns on businesses in agriculture and trade can be above 100 % annually (Mexico. The problem of adverse selection and information asymmetry (ex ante as well as ex post moral hazard) is really severe in the case of these customers. depending on the regulatory thresholds of their organizational structures:
Informal institutions (self-help groups. The poor clients have no credit history.).
Development banks are large. centralized.with the aim of providing financial support to the local community. as well as for the higher contribution to the systematic risk. financial NGOs that operate principally by offering microcredit as part of development projects. and cooperative credit banks. mainly through partners. Within this category. it is possible to include different types of institutions with different structural and organizational complexity (financial NGOs.saving banks. attracted by the large profits and positive performances achieved by intermediaries specialized in micro-enterprises. in part or entirely. Therefore. PMFBs are banks specialized in offering only microfinance services.They can all offer credit and they are all deposit-taking institutions: for these reasons. financial cooperatives. such intermediaries may result from a process of privatization of public banks. The most popular and widespread are. it is possible to list a limited number of pure microfinance banks (PMFBs). but they are not under banking regulation. Alternatively. MFFIs are subject to financial regulatory requirements. microfinance oriented banks (MFOBs) and microfinance sensitive banks (MFSBs). they are all under banking regulation. according to the wideness of their financial intermediation activities. Some of the most developed NGOs offer different types of financial services. often combined with the offer of technical assistance and other social intervention for beneficiaries. however. as well as from donor states. due to the higher complexity that would derive for those institutions in liquidity management. which operate exclusively or mainly for the benefit of their own members. more common in developing countries. cooperative banks and development banks. The chance to offer demand deposits. To this aim the NGOs make use. Microfinance services can also be offered by different types of cooperative institutions. Formal institutions can be further classified into three main categories: microfinance banks (MFBs). of fund donated by supranational institutions and agencies. postal saving banks). which provide rotating credit to their own members using resources from a centralized fund made available by the savings of the members themselves. the Rotating Savings and Credit Associations (ROSCAs). they may be newly created banks which aim to enter into the microfinance market. These may be the result of upscaling of NGOs specialized in microcredit that have converted to banks in order to maximize the economic sustainability of their initiatives and widen their client base. Within MFBs. credit unions.which offer credit and other services to their own members. Despite their differences. the common characteristics of these institutions lie in the legal status of cooperative companies and in the possibility to collect time deposits. is largely prohibited by regulatory authorities. These include more organized credit unions ± such as those based in the UK and Ireland. and usually government-owned banks created to support specific sectors (small business developing banks) or geographic
. Lastly. raise private funds and collect savings from their clients. on the other hand.
The data includes the information related to savings of Self Help Groups (SHGs) with banks as on 31 March 2009. or financial conglomerates which decide to enter into the microfinance sector downscaling their traditional activities ± albeit to a limited extent compared to their own core business. They have joined hands proactively with informal delivery channels to give microfi nance sector the necessary momentum.
MICROFINANCE IN INDIA
Microfinance sector has covered a long journey from micro savings to micro credit and then to micro enterprises and now entered the fi eld of micro insurance. Regional Rural Banks (RRBs) and Cooperative Banks operating in the country.areas (rural development banks). micro remittance. The year 2008-09 is the third year that the data on progress in microfi nance sector have been presented on the basis of returns furnished directly to NABARD by Commercial Banks (CBs). Finally. of banking groups. social and cultural empowerment.. in some developing countries they also take the form of private banks. Here. These are mainly small. particularly large ones. loans disbursed by banks to SHGs during the year 2008-09 and outstanding loans of SHGs with the banking system and the
. micro pension and micro livelihood. for economic reasons or for the positive externalities deriving for their own image. mainly. it has been possible to include some commercial banks. Financial institutions in the country have been playing a leading role in the microfi nance programme for nearly two decades now. This gradual and evolutionary growth process has given a great boost to the rural poor in India to reach reasonable economic. leading to better life of participating households. creating specific companies or specialized divisions within their organizations (Molyneux. Vallelado. These consist. as well as financial institutions which come directly from local bodies. Finally. within formal microfinance institutions. two categories of intermediaries can be identified: microfinance-oriented banks and microfinance-sensitive banks. 2008).. in the sphere of microfinance-sensitive banks it is possible to include all the banks and financial intermediaries that. microfinance has registered an impressive expansion at the grass root level. in recent years. banking groups and financial conglomerates. view microfinance as an attractive opportunity. local banks. P. In the area of microfinance-oriented banks it is possible to group together all the banks or financial institutions which are specialized in financing small to medium enterprises and micro-enterprises and which are therefore professionally inclined to take an active part in microfinance programmes. E. strongly rooted in the local territory. During the current year too.
Private Sector Commercial Banks (28). It has been encouraging the voluntary agencies. presently. in the formal fi nancial system comprises of Public Sector Commercial Banks (27). bankers. equity/ capital support to MFIs to supplement their fi nancial resources and provision of 100% refi nance against bank loans provided by various banks for microfi nance activities. promotional grant assistance to Self Help Promoting Institutions (SHPIs). NABARD has been instrumental in facilitating various activities under microfi nance sector. State-wise and agency-wise basis in this booklet. The focus in this direction has been on training and capacity building of partners. other formal and informal entities and also government functionaries to promote and nurture SHGs. the information related to bulk lending under Bank Micro Finance Institutions (MFIs) ± SHGs has also been compiled. The data received from banks have been compiled on region-wise. socially spirited individuals. Revolving Fund Assistance (RFA) to MFIs. It is observed that most of the banks participating in the process of microfi nance have reported their progress under the programme. In addition.
.details of Non-Performing Assets (NPAs) and recovery percentage in respect of bank loans provided to SHGs as on 31 March 2009. The booklet also has the details related to SHGs under Swarnjayanti Gram Swarojgar Yojna (SGSY) and exclusive women groups. State Cooperative Bank (31) and District Central Cooperative Banks (371). The banks operating. involving all possible partners in the arena. Regional Rural Banks (86).
³Unfortunate´ Reasons: Sometimes microfinance institutions have to face problems which cannot be resolved. Managerial Reasons: One of the major problems which the MFIs can resolve is managerial problems. profit organizations are registered under different set of acts and non-profit organizations come under different legislations. Managerial problems are a major factor and they have more effects than any other problems discussed. The problems can be solved on many occasions but sometimes cannot be avoided. MFIs generally lose man power too. the lack of this aspect can lead the microfinance institutions to behave similar to the local moneylenders. Furthermore. poor record keeping and obviously lack of management capacity. 3. the important point of corruption cannot be neglected. 4. In many countries.PROBLEMS AFFECTING MFIS
Although there have been various successful stories about microfinance institutions helping the poor. 2. it could seem unsubstantial. On the first view. The desire to make MFIs an industry. but these legalities sometimes create complications. they face many problems. In such adverse situations. 1. They tend to be fairly straightforward and the solutions to them are also pretty straightforward. These problems arise in cases when something ³unfortunate´ happens to a person or a community
. Another reason of failure has been lack of motivation. We discuss the problems MFIs face under the following broad categories. Many a times. commercialize microlending or enable them to be a profit making institutions should not distract them from one important aspect for which they are formed in the first place: social service by enabling poor to work on profit making projects or small businesses. Ethical Reasons: Microfinance Institutions can be often viewed as a profit making organization. MFIs thrive on better economical conditions and an economic down turn can incur heavy loss on them. Legal Reasons: Microfinance institutions can be viewed as a social organization helping the poor and a profit organization too. These problems include mainly: lack of management training.
certain unresolved dilemmas regarding the nature of the intermediary institutions. The intermediary should encompass the strengths of both formal financial systems and NGOs and CBOs and should be flexible to the needs of end users.
SUCCESSFUL MICROFINANCE MODEL THAT HAVE EMERGING IN INDIA
An intermediate model that works on banking principles focus on both savings & credit activities and where banking services are provided to the clients either directly or through SHGs There is also a wholesale banking model where the clients comprise NGOs. however. This model involves a unique package of provide both loans and capacity building support to its partners There is an individual banking-based model that has its clients as individuals or joint liability groups. if the goal of poverty allieviation has to be achieved. NGOs and CBOs have been involved in community development for long and the experience shows that they have been able to improve the quality of life of poor.
. There are arguments both for and against each structure. whatever the mechanism may be. if this is an indicator of development. MFIs & SHG federations.CURRENT SCENARIO
The emerges is that it is very critical to link poor to formal financial system. The strengths and weaknesses of existing NGOs/CBOs and microfinance institutions in India indicate that despite their best of efforts they have not been able to link themselves with formal systems. These dilemmas are very contextual and only strengthen the argument that no unique model is applicable for all situations. It is desired that an intermediary institution is required between formal financial markets and grassroot. There are.
In discharging its role as a facilitator for rural prosperity NABARD is entrusted with
1. monitoring and inspecting the client banks
BESIDES THIS PIVOTAL ROLE. NABARD ALSO:
Acts as a coordinator in the operations of rural credit institutions
Extends assistance to the government. It also has the mandate to support all other allied economic activities in rural areas. cottage and village industries.
Evaluating. the Reserve Bank of India and other organizations in matters relating to rural development
. promote integrated and sustainable rural development and secure prosperity of rural areas. small-scale industries.PART 2
NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture.
Providing refinance to lending institutions in rural areas
2. handicrafts and other rural crafts.
Bringing about or promoting institutional development and
613.16952. Under the Farmers' Club Programme. RRBs and other eligible financial institutions during 2007-08 aggregated Rs.71 crore as on 31 March 2008.74073. soil conservation. helping farmers get access to credit. flood protection. Offers training and research facilities for banks.41 crore has been sanctioned for 280227 projects as on 31 March 2008 covering irrigation.
. With this. state cooperative agriculture and rural development banks. a cumulative amount of Rs. drinking water schemes.68 lakh Kisan Credit Cards that have been issued through a vast rural banking network.27 crore. health and education.83 crore during 2007-08.9046. Through the Rural Infrastructure Development Fund (RIDF) Rs. a total of 28226 clubs covering 61789 villages in 555 districts have been formed. Farmers now enjoy hassle free access to credit and security through 714. rural roads and bridges.8034. technology and extension services.93 crores were disbursed during 2007-08. 416 projects in 94 districts of 14 states have benefited. forest management etc. Refinance disbursement under Investment Credit to commercial banks. state cooperative banks. Under Watershed Development Fund with a corpus of Rs. cooperatives and organizations working in the field of rural development
Helps the state governments in reaching their targets of providing assistance to eligible institutions in agriculture and rural development & Acts as regulator for cooperative banks and RRBs
SOME OF THE MILESTONES IN NABARD'S ACTIVITIES ARE:
Refinance disbursement under ST-Agri & Others and MT-Conversion/ Liquidity
support aggregated Rs.
The Bank will also provide direct lending to any institution as may approved by the Central Government.MISSION
Promoting sustainable and equitable agriculture and rural development through effective credit support.
THE MAIN OBJECTIVES OF THE NABARD AS STATED IN THE STATEMENT OF OBJECTIVES WHILE PLACING THE BILL BEFORE THE LOK-SABHA WERE CATEGORIZED AS UNDER:
1. 4 . 3.
NABARD was established in terms of the Preamble to the Act.
The National Bank will be an apex organisation in respect of all matters relating to policy. institution building and other innovative initiatives. handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas and for matters connected therewith in incidental thereto". cottage and village industries. small scale industries. Cottage and Village Industries. 2. Handicrafts and other rural crafts and other allied economic activities in rural areas. short-term for the promotion of activities in the rural areas. related services. planning operational aspects in the field of credit for promotion of Agriculture. Small Scale Industries. "for providing credit for the promotion of agriculture. The Bank will serve as a refinancing institution for institutional credit such as long-term.The Bank will have organic links with the Reserve Bank and maintain a close link with in.
And they have a bank account in Dena Bank where they deposit these amount every month. commercial loan. And the interest earned is distributed within the group members. 5. The chairperson has the responsibility of taking the money and depositing into the bank. etc. Every month each person gives Rs. personal loan.PRIMARY DATA PART2 BRAHMIN COMMUNITY This SHG works on Community Model. This SHG provides loan to the poor person who comes under his community. Questions asked: If they provide loan to the poor person then only it is applicable: From how many years you have been providing microfinance to the poor people? y From 1998. Which type of loan do you give? y All type of loans viz.
. On what basis do you give the loan? y They provide loan on relationship basis and if there is no relation between the parties then they sanction the loan on the basis of credibility and their background.m and then they will give loan to the needy person. If there is no one to take the money then the amount will be in the bank only. Their first priority to give loan is in its member group only and they will charge 1% p. they are providing the microfinance. There are total 13 members in this group.000 for the purpose of giving loan.
Still no one has become bad debt.m. What is the interest rate charged by you? y They charge 1% p. They don¶t take security. 35. What is the repayment ratio? y Till now the repayment ratio is 100%. From where do you get the finance? y There are total 13 members in the group so they bring funds according to the loan amount. If any person doesn¶t repay the loan amount then what are the steps that you take against the default person?
.000.What is the minimum amount for the loan? y The minimum amount is Rs. 50.00. 50.000. What is the turnover of this SHG? y Turnover is Rs. Do you take any security against the loan disbursed? y No.
Any guarantors needed? y No guarantors needed. 500 y The maximum amount of loan given to one person is Rs. And they don¶t disbursed more than Rs.000 to one person.
If any person wants a Bishi then he has to inform before one week and then and then only he will get the Bishi.
. In this Bishi. If any person does not pay the amount of Bishi on time then the chairperson will collect Rs. 1 cr Penalty: Rs. y If the problem is not genuine then we will take the money by hook or crook. y If he is unable to repay the loan then we will take it whatever amount he/she gives. Bishi This SHG works on Credit Union Model.y Still it doesn¶t happen so we don¶t know what we will do but we will see why the person is not able to repay the money if the problem is genuine then we may not take the money. If any member doesn¶t pay the amount of loan on time then it is the responsibility of the guarantors to pay the loan as well as interest. 100 Weekly payment (Sunday) Maturity: One year Total Turnover: Rs. 21 per share Interest charge @ 2% per month. The working style of this Bishi is as follows: y y y y y y y y y y y y Total members: 76 Minimum Amount: Rs. The amount of interest will be distributed within the members. there are 276 members who help each other. 21 per share as a penalty. It was started before 10 years ago. Two guarantors are needed who are the part of this Bishi.
(Greeen Park) y Office at the Ambica Parlour. y y y y y
There are around 50 members on this group. Loan amount will be within your liability. Recovery is easy. No one is the owner.
Umiya Mitramandal It was started 3 years ago with an intention to help the small vendors because they are unable to get the small loan from the financial institution and if they need small loan then they go to the moneylender which charges high interest. Biasness can happen.100 per week. y It is a group of people of one particular area of Mehsana. Any member can get the loan upto Rs.5000. y No documents required. y Fix interest rate. Disadvantages y y y y A person has to inform about the loan before one week. Member has to pay Rs. y Started since last three years back in Mehsana. A person has to take the B C for the whole year.Advantages y No restrictions on members.
com (12/7/2010) 2.edarural.com/financial-regulation-financialinclusion-speech-deputy-governor-reserve-bankindia.basixindia.ac. www.unitedprosperity. www.aspx (12/16/2010) 10.in/cmf (11/29/2010) 3.pdf12/7/2010) 11.html (12/7/2010)
.com (11/29/2010) 4.com (12/14/2010) 8. http://mas. y One has to pay money within three months.in/contactus.com (12/12/2010) 6. http://www. http://ifmr. CGAP Microfinance Global Evaluation Survey 2010 (12/14/2010) 13.microfinanceinfo.co.nabard.wikipedia. www. www.sbi.y If no one borrows money then that money will be given to outside person on interest rate @ 10%.com/news/2010/04/01/specialreport-is-the-crisis-over-the-outlook-for-microfinance-investment2010/12/8/2010) 12. http://www.org (12/15/2010) 5. y Accounts maintained by three or four people of the group at Ambica Parlour every night. www. www.sewa. Bibliography 1. http://www. http://indiamicrofinance.org/us/faqs (11/29/2010) 9.com (125/2010) 7.microfinancefocus.com/documents/SHG-Study/ExecutiveSummary. y Income of interest will be distributed within the members.