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1. INTRODUCTION

1.1 What Is Microfinance?
Micro financing means small size loans. The origins of micro financing can be traced to
Europe. The late nineteenth century saw booming of credit cooperatives to help lower income
groups through credit. The cooperatives grew to serve 1.4 million in Germany in 1912. These
programs were then replicated in Ireland and Italy. The government of Madras in 1880, then
under the imperial rule, introduced the programs to address poverty in India. . By 1912, over
four hundred thousand Indians belonged to the new credit cooperatives. By 1946 their
members exceeded 9 million.

The cooperatives during this time period took hold in the State of Bengal, now
Bangladesh. In the early 1900’s, these programs were so well known in Bengal that the
leading merchant of Boston, USA, spent time in India to learn about the cooperatives in order
to later set up similar programs in Boston.

The credit cooperative eventually lost steam in Bangladesh, but the notion of group
lending had established itself and after experimentation and modifications, became one of the
bases for the Grameen model in the country. It is, just not coincident that when Bill Clinton
was still Governor, it was Muhammad Younus, founder of the Grameen Bank, who was
called on to help and set up the Good Faith Fund in Arkansas, USA.

Microfinance programmes are one of the most important interventions in developing
country efforts to reduce poverty. Recent years have seen a huge growth of the sector in
terms of numbers and size of organizations, numbers of clients and provision of subsidized
donor funding. A large proportion of MFIs include poverty reduction in their Mission, and
donor funding is allocated to microfinance on this basis. At the most basic level there is a
need to understand and improve the impact of MFIs as a key premise to successful poverty
reduction.
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Over time, microfinance has come to include a broader range of services (credit, savings,
insurance, etc.) as we have come to realize that the poor and the very poor that lack access to
traditional formal financial institutions require a variety of financial products.

Traditionally microfinance was focused on providing a very standardized credit product.
The poor, just like anyone else, need a diverse range of financial instruments to be able to
build assets, stabilize consumption and protect themselves against risks. Thus, we see a
broadening of the concept of microfinance because our current challenge is to find efficient
and reliable ways of providing a richer menu of microfinance products.

The typical microfinance clients are low-income persons that do not have access to
formal financial institutions. Microfinance clients are typically self-employed, often
household-based entrepreneurs.

In rural areas, small farmers and petty traders
In rural areas, they are usually small farmers and others who are engaged in small
income-generating activities such as food processing and petty trade

In Urban areas, more diverse
In urban areas, microfinance activities are more diverse and include shopkeepers,
service providers, artisans, street vendors, etc. Microfinance clients are poor and vulnerable
non-poor who have a relatively stable source of income.





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1.2 Introduction To The Firm

In today’s scenario, education is the most valued asset for all human being. Despite
having a lot of policies and facilities from the government, our country lags behind in this
aspect. My business plan though will not help in irradiating these problems, but will
definitely render a helping hand in reducing these. To start of this, I have opted to start a book
store in Jowhar, a backward village in Maharashtra with a population of overall 250000 and
current school going population of 800 out of 13000 (with falls under the age group of below
18 years).

The business name will be My Books; whereby it will specialize selling of a wide variety
of academic and other scholarly materials. My Books will conduct selling of books to
students from all parts of the village and nearby areas. My Books will be a private limited
company registered in the state of Maharashtra.

Due to the small size of the organization and the human resources, the organizational
structure will not been very complex. Only one manager (Me) and an assistant will be
recruited to head the business. This will be the only executives of the business.

The aspect of shop development and maintenance will be the main asset and central focus
of the business operations. Book storage of all variety will be prioritized in the business thus
ensuring that clients are fully satisfied. The company will is aiming to capture the attention of
all customers by ensuring that a wider stock of books is maintained.

The purchase of books from different authors will be the main production process of the
business along with different subscriptions to articles and weeklies. Alongside books, the
company will also be involved in stocking a wide variety of other reading materials that will
be appealing to customers.
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1.3 Location and Operations

The business is planned to be located in a village called Jowhar, a village in Maharashtra,
whereby it will have its physical shop. Importantly, it should be noted that, the business is
solely looking for the local market.

A number of strategies have been formulated to ensure effective reach to the public as
they are not very much open to the idea of education completely. The most outstanding
strategy for luring the attention of the customers is taking the help of the village headman
who holds a upper hand in the decision making of the village.

A dominant selection and storage of products has been prioritized so as to ensure
customers are fully satisfied with the services and products of the businesses. In this case, the
business is planned to store a diverse variety of books in all fields of study thus being able to
accommodate all customers’ needs.

1.4 Marketing strategies
The business is targeting all type of people who are interested in learning. This is
following the increased reading culture among people of different regions of the globe.
Market research conducted during the opening of the municipal school in that area revealed
that people are interested in learning but are not getting access to proper books and other
resources.

The marketing strategy of the business are also planned to be very efficient. In this case,
the use of school master and the village headman to do a word of mouth advertisement will
be on the priority list. The shop will be designed so as to be able to draw the attention of
onlookers and passerby. Importantly, the business is aimed at meeting the needs of local
students and scholars.
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2. Financial Projection
The business is planned to be a private limited company. The startup capital will be
mobilized through loans and contributions from self and family. The startup capital for
the business is set to be Rs. 50000/-.

This is for ensuring establishment of the shop and the salary for the first twelve
months of operation. On the other hand, the company has also projected an appealing and
admirable profit margin for the first three years.

The annual sale projection for the 1st year of operation is Rs. 4,80,000. This is
expected to increase to Rs. 5,76,000 and Rs. 8,40,000 in the 2
nd
and 3
rd
year of operation
respectively.

In this regard, a net profit of Rs. 2,44,000 is expected in the 1
st
year operation. In the
second year of operation, the profit is expected to rise to approximately Rs. 3,67,000. The
profit projections for the third year of operation are Rs. 6,00,000.

Sl. No. List Of Items Estimated Cost (In Rs.)
1 Shop Deposit 5000
2 Shop Rent (Monthly) 500
3 Shop Maintenance 5000
4 Employee Hiring Cost 500
5 Employee Salary (Monthly) 3000
6 Books And Subscription Cost 30000
7 Working Capital 6000

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3. Finance Procurement

Money is the lifeline of any business. so whether we starting a business or running as
existing one, securing financing is a major factor, especially for small businesses. Many
budding entrepreneurs find the task daunting and don’t even know how to begin. It’s always
preferable to choose a public sector bank for the small business funds requirement as they
documentary requirement are less cumbersome.

The UNION BANK OF INDIA has simplified the process for procurement of loan under
MICRO FINANCE in order to boost the entrepreneurship in the country. Following are the
steps:-

1. Contacting the loan manager for the microfinance in UBI and ask them about the
requirements of the documents for the start-up business giving them an application

2. Show them a detailed business plan of the venture giving details about viability of the
business and the investment required for both fixed and working capital requirement
along with the repayment period.

3. The requirement of the guarantor would depend on the amount and the business plan.

4. The Micro Finance has been provided at the BASE RATE of the UBI i.e. 10%.

5. Documents like address proof and identity proof is required for the procurement of
the loan.

6. The loan has been availed from the bank under two categories TERM LOAN for
purchasing fixed assets and WORKING CAPITAL LOAN.