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SCHEME FOR FINANCING MICRO FINANCE INSTITUTIONS (MFIs) / NON

GOVERNMENT ORGANISATIONS (NGOs)


Purpose
Routing micro credit through NGOs / MFIs functioning as financial intermediaries. With the ultimate aim
of increasing the outreach by financing large number of Self Help Groups.
Who are eligible?
The NGO / MFI, to be eligible for finance under the scheme, will have to be of any one of the following:
 Societies registered under Societies Registration Act,
1960 or similar State Act.
 Trusts registered under Public Trust Act, 1920 or
similar Act.
 Companies registered under Companies Act, 1956
including Section 25 companies.
 Non Banking Financial Companies providing financial
services to SHGs which satisfy the following criteria as laid
down by RBI may only be taken up for financing:
o Engaged in micro financing activities.
o Licensed under section 25 of the Companies Act,
1956, which are not accepting public deposits from the
purview of sections 45-IA(Registration), 45-IB (maintenance
of liquid assets) and 45-IC (transfer of profits to Reserve
Fund) of the RBI Act, 1934.
 Specialist and other Co-operatives such as Mutually
Aided Co-operative Societies,etc.
 Any other type of institution that offer micro finance
and related services may be considered on merits.
Track record
 The NGO / MFI has been in existence for at least 12
months and/or it has a track record of running a successful
micro credit programme at least for the last 6 months.
 The NGO / MFI has partnership with a minimum of 200
SHGs.
 Its activities should be secular in nature.
 It maintains a satisfactory and transparent accounting
system, MIS and internal audit system.
 The NGO / MFI should be continuously profit making,
where they are in existence for 2 years or more. In case of
existence of less than 2 years, the Sanctioning Authority
will ensure that the projected profit of the NGO / MFI should
be sufficient to meet the repayment obligation of the loan.
 The NGO / MFI should not be a defaulter to any Bank /
Financial Institution.
 Portfolio at risk of the NGO / MFI should be less than
5%. (Ratio of the amount overdue for 60 days or more to
the total loans on a given date) 56
 In case of takeover of NGO / MFI loan from other banks,
all the terms and conditions for taking over of the loan will
be applicable.
 NGO / MFI must exhibit transparency in dealing with its
borrowers like levying of service and other charges, etc.
 NGO / MFI will not borrow from other sources for the
same project for which loan from our Bank is being availed.
 Loans below Rs 200 lacs -The NGO/MFI should score
minimum scores in the scoring model of the bank. For the
loan of above Rs 200 lacs they should have valid credit
rating from any of the Micro Credit rating agencies, MCRIL,
CRISIL, CARE, ICRA and Planet Finance.
Loan amount
 Need-based repeat finance.
 Requirement of finance to be worked out based on the
health of the NGO / MFI and the business plan as per the
appraisal format
Security
Hypothecation of Book Debts of the NGOs / MFIs. And , personal guarantee of the Promoters / Directors
and charge over other available assets
How to repay the loan?
Term loans are repayable in : monthly / quarterly / half-yearly. Instalments depending on the project /
purpose. However, total repayment period should not exceed 3 years.Cash credit loans are to be
renewed annually
How to apply for this loan?
You may contact our nearest branch or even talk to the marketing officers visiting your village

Indian Microfinance Bank MDMSB Creates Partnership With


International Bank HSBC

The Mann Deshi Mahila Sahakari Bank (MDMSB), a microfinance institution (MFI)
based in the Indian city of Mhaswad, recently announced that it signed an
agreement with the international commercial bank, Hong Kong and Shanghai
Banking Corporation (HSBC). Under the agreement, the MFI will act as HSBC’s
“corresponding bank” in the region, and screen potential borrower for
microfinance loans. In return, HSBC will provide the institution with a new cash
management system as well as extend it a line of credit. Additionally, HSBC has
granted MDMSB USD 100,000 for microfinance loans. The deal was signed at a
recent meeting between HSBC India country head Naina Lal Kidwai and MDMSB
chairwoman Chetna Gala Sinha.

MDMSB was founded in 1997 by a group of rural Indian women with an initial
equity of USD 12,000. According to the banks website, as of March 2005, it has
24244 clients, a USD 962,000 gross loan portfolio, and a return on equity of
3.44%. In addition to credit services, it offers savings products, microinsurance
schemes, and business education to its clients.

HSBC is a large international banking network which includes 9,500 offices in 76


countries in Europe, the Asia-Pacific region, the Americas, the Middle
East and Africa. At year-end 2005, HSBC reported total assets of approximately
$1.5 trillion. Previously, it has engaged in several microfinance pilot projects with
MFIs in Brazil, India, Mexico, the Philippines, and Russia, with the total capital
designated for these projects just under $62.5 million. According to HSBC’s
Kidwai, “though HSBC’s exposure to microfinance is limited at present, we will
identify more such opportunities where we can participate in the process of
economic self reliance of rural women.”