A REPORT ON Microfinance in India with special reference to Canara Bank

Canara Bank Head Office Bangalore



Canara Bank Head Office Bangalore


A Dissertation Submitted to Institute for Technology and Management, Bangalore For the Partial Fulfillment of the PGDM Program

SWATI BHARDWAJ Reg. No: PGDM 2009-11/53

Under the Guidance of:

Industry Guide- Mr. B. S. Umesh Rao Senior Manager-Microfinance Division
Faculty Guide- Prof Madhavi Jayanthi Lecturer Finance

Institute for Technology and Management Bangalore-560076 2009-11

I hereby declare that this project entitled study on µMicrofinance in India-with special

reference to Canara Bank¶ conducted at Canara Bank Head Office Bangalore, is a record of
independent work carried out by me during the academic year 2009-11 under the guidance of my faculty guide Prof. Madhavi Jayanthi of ITM Bangalore and my company guide Mr. B. S. Umesh Rao, Senior Manager-Microfinance Division and Mr. Ashwani Kumar, Manager, AgriBusiness, Marketing unit, Priority Credit Wing, Canara Bank H.O., Bangalore. I also declare that this project is the result of my effort and has not been submitted to any other university or institution for the award of any degree or personal favor whatsoever. All the details and analysis provided in the report hold true to the best of my knowledge.

SWATI BHARDWAJ Place: Bangalore Date:

ACKNOWLEDGEMENT Working on this project has been a great learning experience for me. Manager. Marketing unit. Senior Manager-Microfinance Division. SWATI BHARDWAJ Management Trainee ITM. Canara Bank H. I would like to take this opportunity to express my gratitude to the people who have helped me to bring out this project.O. who gave me the opportunity to do this project. Priority Credit Wing. valuable knowledge and experience helped a lot. Ashwani Kumar. His timely guidance.Latha Ramesh and Prof Madhavi Jayanthi for his guidance and support. Agri-Business. B. I take this opportunity to express my profound gratitude and deep regards to my guide Mr. I would also like to thank Prof. S. Bangalore 1 .O. Canara Bank H.. Umesh Rao.I am also grateful to Mr. Bangalore for his guidance. monitoring and constant encouragement throughout the course of this project.

7 2.6 2.5 2.1 2. Mission and Quality Policy Products/ Services Profile Area of Operation Ownership Pattern Competitors Information Infrastructural Facilities Work Flow Model Achievement/ Award Future Growth and Prospect McKinsey¶s 7S Frame Work SWOT Analysis Analysis of Financial Statement Page No 8-9 10-24 10-11 12 12 13-17 18 18-20 21 22 22 23-24 24 25-28 29-30 31-33 2 .10 2.3 2.9 2.INDEX Chapter 1 2 3 4 Particulars Statement of Problem Objectives of the Study Methodology Limitations of the Study Page No 06 06 06 06 Part A Chapter 1 2 2.11 3 4 5 Particulars Industry Profile Company Profile Background of the Company Nature of the Business carried Vision.4 2.2 2.8 2.

Part B Chapter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Particulars Executive summary Microfinance Introduction Microfinance definitions Activities/Products/Services in microfinance History/Origin of Microfinance Demand for Microfinance services Supply for Microfinance services Legal and Regulatory Framework Major players Growth of Microfinance Microfinance delivery methodologies Present situation Success factors of Microfinance in India Indian Microfinance at Global context Impact of Microfinance Issues of Microfinance Microfinance at Canara Bank Future of Microfinance Conclusion Suggestion Learning experience Bibliography Abbreviations Page No 35 36 37-38 39 40 41-43 44 45-47 48 49-51 52-54 55-60 61-63 64 65 66-68 69-82 83-84 85 86 87 88-89 90 3 .

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Product and services of Canara Bank Personal Banking Corporate Banking NRI Services Priority credit finance Ownership Pattern of Canara Bank Financial Statement Analysis Growth of Microfinance Classification of MFIs in India Characteristics of Microfinance delivery models in India Growth in Indian Microfinance Sector Biggest MFIs in India SHG-Bank linkage model MFIs Bank Linkage model Coverage of Women SHGs Comparative analysis of Micro financial services offers to the poor Coverage under DIR scheme Coverage under Debt Swapping Scheme Coverage under Krishi Mitra Card Coverage under SHG Credit linkage Performance of Group Coverage under JLG/TFG 13 14-15 15 16 17 19 31 49 50 51 56 58 59 60 60 63 74 75 78 79 80 82 Particulars Page no. 4 .LIST OF TABLES Table no.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Ownership pattern of Canara Bank Work Flow Model McKINSEY¶s Framework Development Process through Microfinance Micro finance intervention through Different organization Outstanding portfolio of Microfinance Portfolio of Borrowers Microfinance portfolio of Canara Bank on 31/03/09 Microfinance portfolio of Canara Bank on 31/03/10 Canara Bank lending to priority sector Cansaral Saving Account and GCC Coverage under DIR scheme Coverage under Debt swapping scheme Coverage under Krishi Mitra Card scheme Coverage under SHG Credit linkage Performance of group during the year Coverage under JLG &TFG 19 22 25 46 47 57 57 70 71 72 73 74 75 78 79 80 82


³The study of Microfinance in India with special reference to Canara Bank´. India is one of the highly populated countries in the world currently. Reason being unawareness, illiteracy, avoidance or disinterest; in turn leading to economic downfall and almost 30-35% of the people are under the Below Poverty Line (BPL). These people are not even able to meet their consumption need. Therefore there is a need of a tool that not only serves them but also make them self capable, Microfinance is such an approach that would result in the better standard of living for them.

The objective of this study is to get an overview of Microfinance Industry in India, finding out the need of microfinance by poor, different types of micro financial products available to the poor their supply and demand and to know the initiatives taken by Canara Bank for meeting the financial need of poor as well as to find out where they are lagging in fulfilling their need and how to overcome this.

Secondary data collection: The study is purely theoretical; no primary data collection was required for the project. All the data collected for the study was based on different sources, like company reports, websites, details provided by the guide, case studies related to financial inclusion, RBI guidelines, Canara bank reports and initiatives etc

The study holds good only for the time period the project was undertaken.  Study was focused mostly on Canara Bank, Head Office  The data recorded is presumed to be authentic and information collected mainly from secondary sources.  Lack of comprehensive data about the future plans.  Lack of information which is confidential in nature prevented an in-depth study of the positive and negative effects of microfinance.




form a part of the nationalized banks category. industry and agriculture it is also involved in offering pension for retired employees. have become a part of our lives. The specialized banking institutions that include cooperatives. Modern banking institution is a large corporate giant with large resources and a vast field of activity. etc. These private sector banks include 24 foreign banks that have begun their operations here. private and specialized banking institutions. 8 . there has been a great surge of banking industry throughout the world with the growing number of banking offices. 223 banks are in the public sector and 51 are in the private sector. The economical position of the country is also driven by the performance of banks. In India. The Indian banking system can be classified into nationalized. banks are also modernizing operations with a view to satisfying modern customers with an aim to improve bank operations with a view to maintain high standard banking system that involves applications of better management techniques. The industry is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. rural banks. It is a centralized body that monitors discrepancies and shortcomings in the system. Banks are now looked upon as development agents instead of purveyors of credit to the large industries and big business companies. Since the nationalization of some big commercial banks in India in the year 1969. The banking business today has become highly critical and competitive between various classes of banks in offering a greater variety of services nationally and internationally. Banks. as the time advanced and with the progress of commerce and industry. the scope of banking also expanded. Industry estimates indicate that out of 274 commercial banks operating in the country.1) INDUSTRY PROFILE Banking Industry in India The world economy today is driven by the way the banks in the world perform. class banking has given way to mass banking. government servants and collection of utility bills. The banking institutions in the past performed very limited functions such as receiving deposits against bank notes and then issuing notes in the country. by extending their services to areas hitherto untouched and making themselves accessible to the common man. Apart from providing credit to trade. With globalization setting in. bringing in its fold very large number of customers. The Reserve Bank of India is the foremost monitoring body in the Indian Financial sector.

Following the recent financial crisis. June 21. 9 . With respect to gross bank credit.8 trillion.5 billion in 2009 to US$ 4. The State Bank of India has become the first Indian bank to be ranked among the Top 50 banks in the world. The total brand value of the 20 Indian banks featured in the list stood at US$ 13 billion.The Indian banking system is financially stable and resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis.8%.69 billion to US$ 272. as a group.8% and other scheduled commercial banks at 17.9% of the aggregate deposits. nationalized banks. The purchase has increased RBI¶s share of gold holdings from approximately 4% to 6%. Foreign banks and regional rural banks had a share of 5. 5. The confidence of non-resident Indians (NRIs) in the Indian economy is reviving again. Foreign exchange reserves were up by US$ 1. accounted for 50. nationalized banks hold the highest share of 50. ICICI Bank also made it to the Top 100 list with a brand value of US$ 2.1%. The share of other scheduled commercial banks. According to RBI's 'Quarterly Statistics on Deposits and Credits of Scheduled Commercial Banks: December 2009'. Significantly. NRI deposits have increased by nearly US$ 47. new deposits have gravitated towards the public sector banks. on account of revaluation gains.2 billion.6% in the total bank credit. foreign banks and regional rural banks in aggregate deposits were 17. according to a stress test done by the Reserve Bank of India (RBI).7 billion for the purchase of 200 metric tonnes of gold from the International Monetary Fund (IMF).4%. as per the Brand Finance study. for the week ending June 11. 20 Indian banks have been included in the Brand Finance® Global Banking 500.6 billion in 2010.3% and 2. Most of this has come through Foreign Currency Non-resident (FCNR) accounts and Non-resident External Rupee Accounts. 2010.5% respectively in the total bank credit. the RBI has the tenth largest gold reserves in the world after spending US$ 6.8 billion on March 2010. with SBI and its associates at 23. In the annual international ranking conducted by UKbased Brand Finance Plc. while State Bank of India and its associates accounted for 23.5% and 3% respectively. capturing the 36th rank. The brand value of SBI increased from US$ 1. as per the RBI¶s June 2010 bulletin.

It has attained the status of a national level player in terms of geographical reach and clientele segments. a great visionary and philanthropist. At the time of the acquisition the bank had five branches. The Bank has gone through the various phases of its growth trajectory over the hundred years of its existence. Raghumathmul Bank.1) BACKGROUND AND INCEPTION OF THE COMPANY Canara Bank was founded by Shri Ammembal Subba Rao Pai.2) COMPANY PROFILE Canara Bank: ³A good bank is not only the financial heart of the community. In 1976. Indo Hong Kong International Finance Ltd and opened its third foreign branch. in July 1906. It has launched internet and mobile banking services. the Bank completed a century of operation in the Indian banking industry. at Mangalore. This eventful journey of the Bank has been characterized by several memorable milestones.' in 1910 with its head office in Bangalore. These include:  Launching of Inter-City ATM Network  Obtaining ISO Certification for a Branch 10 . then a small port in Karnataka. the Reserve Bank of India (RBI) ordered Canara Bank to acquire G. This bank had been established in 1870. Eighties was characterized by business diversification for the Bank. The growth of Canara Bank was phenomenal. Canara Bank occupies a premier position in the comity of Indian banks. venture capital and factoring. Today. It is the First Bank to be conferred with ISO 9002 certification for one of its branches in Bangalore and is the maiden bank to start Initial Public Offering (IPO). In the year 1985 Canara Bank opened its first overseas office in London and also established a subsidiary in Hong Kong. and had converted to a limited company in 1925. In June 2006. It was started as 'Canara Bank Hindu Permanent Fund' in 1906. in Hyderabad. this one in Shanghai. Canara Bank inaugurated its 1000th branch. With an unbroken record of profits since its inception. Canara Bank has several firsts to its credit. This small seed blossomed into a limited company as 'Canara Bank Ltd. It has established in the areas of mutual funds. In 1958. especially after nationalization by the Government of India along with 13 other major banks in the country in the year 1969. but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people´ 2.

Keeping customer convenience at the forefront. Kolkata. Canara Bank chose Flex cube from I-flex solutions as the application. New Delhi. Canara bank made a partnership with UNEP to initiate a successful solar loan of the highest among nationalized banks. the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. the Bank provides a wide array of alternative delivery channels that include over 2000 ATMs. Canara Bank had a major IT initiative to network all branches and move them to a single software platform. Mumbai.6 million effort. Bangalore. The Canara Bank official site gives us an ATM and branch locator that can give you the exact location and address of your nearest Canara Bank branches and ATM's. 1959 branches providing Internet and Mobile Banking (IMB) services and 2091 branches offering 'Anywhere Banking' services. The Bank entered into an agreement with IBM for rolling out flex cube to over 1000 branches as part of Phase I.covering 728 centers. Lucknow and Hyderabad. Pune. launched in April 2003 to help accelerate the market for financing solar home systems in southern India.  Canfin Homes Limited  Canbank Factors Limited  Canbank Venture Capital Fund Limited  Canbank Computer Services Limited  Gilt Securities Trading Limited  Canara Robeco Asset Management Company Limited  Canbank Financial Services Limited  Canara HSBC Oriental Life Insurance Company Limited As at March 2010. with 3043 branches spread across all geographical segments. Articulation of µGood Banking¶ ± Bank¶s Citizen Charter  Commissioning of Exclusive Mahila Banking Branch  Launching of Exclusive Subsidiary for IT Consultancy  Issuing credit card for farmers  Providing Agricultural Consultancy Services Over the years. the Bank has further expanded its domestic presence. It was a four-year $7. The all India network of Canara Bank boasts of multiple branches in all the major cities like Chennai. 11 . Gurgaon.

enhancing rural self-employment through several training institutes and spearheading financial inclusion objective. the total business of the Bank reached 403. asset quality.  To transform the financial institution not only as the financial heart of the community but the social heart as well. operational efficiency.  To spread education among all to sub-serve the first principle. It has come to the forefront of the commercial and financial services and established a leadership in the financial services.  To work with sense of service and dedication. 2. Canara Bank was ranked at 1299 in the Forbes Global 2000 list. NRI¶s and all the classes of people such as Personal Banking. higher value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social banking´.31) VISION ³To emerge as a µBest Practices Bank¶ by pursuing global benchmarks in profitability.  To assist the needy. Canara bank offers its services to the industry. in various corporate social responsibilities.32) MISSION ³To provide quality banking services with enhanced customer orientation.986 crore. 12 . The Bank has also carved a distinctive mark. others Rs 110 crores and. serving national priorities.´ 2.2. Priority credit and other services etc. promoting rural development.  To inculcate the habit of thrift and savings.2) NATURE OF THE BUSINESS CARRIED Canara Bank is a Public Sector Company undertaking which is running under the Administrative Control of Govt of India. Corporate Banking. 2. namely.  To develop a concern for fellow human being and sensitivity to the surroundings with a view to make changes/remove hardships and sufferings. The total share capital is Rs 410 crores of which government capital is 300 crores. risk management and expanding the global reach.33) QUALITY POLICY  To remove Superstition and ignorance. NRI banking.

4) PRODUCTS AND SERVICES OF CANARA BANK Personal Banking Savings & Deposits Loan Products Cash Management Services Technology Products Mutual Funds Syndication Services Loans & Advances Loans and Advances Remittance Facilities Consultancy Services Insurance Business International Services Card Services Consultancy Services Depository services Ancillary Services IPO Monitoring Activity Merchant Banking Services TUF Schemes Canara e-Tax Other Services Corporate Banking Account and Deposits NRI Banking Deposit Products (table 1) Priority and SME Credit Schemes SME Business RRB Divison Agri-Marketing Agri-Consultancy Rural Development Social Banking CED for Women One time settlement for M& SE 13 .2.

Personal Banking 1.Consultancy Services Current Accounts Housing loan Cash credit for working capital Tax Assistance services Trustee services ± private and charitable Fixed Deposits Home improvement loan Bill Discounting Recurring Deposits Canara Cash (Shares) Bank Guarantee Debenture Trusteeship Kamdhenu Deposits Canara Mobile (Vehicle) Loan for SME¶s Security Trusteeship Savings Bank Account Canara Site loan Finance to SSI¶s Attorney ship Saving Gold Scheme Teacher¶s loan Agricultural loans Estate & Will Service Canara Champ Deposit Scheme Canara Saral Savings Account Canara Tax Saver Scheme Ashraya Deposit scheme Canara Auto Renewal Deposit Canara Super Savings Salary Account Scheme Canara Budget Canara Pension Canara Rent Canara Jeevan Canara Mortgage Doctors Choice Education loan Swarna loan 14 .Savings & Deposits 2.Loan Products 3.Credit services (table 2) 4.

Ancillary Services 8.Card Services 6.5.Other Services Canara Visa classic Canara Robeco MF products Safe Deposit Lockers Safe Custody Services Insurance (Life & General) Technology Products (ATMs) Depository Services Canara Global Gold Card HDFC MF products Canara Corporate card 7 day Banking DD Shoppe Extended Banking hrs Corporate Banking Accounts & Deposits Cash Management Services Current deposits Fixed Deposits Super Fast Service Bulk Collection Service Kamdhenu Deposits Fast Track Service Term loans (table 3) Loans & Advances Other services Canara e-Tax TUF Scheme Gold Card Scheme for Exporters Infrastructural financing Working capital Finance Export Finance Merchant Banking services IPO Monitoring Activity Syndication Services Recurring Deposits 15 .Mutual Funds 7.

NRI Services Deposits Products Loans and Advances Remittance Facilities services (table 4) Consultancy Other services NRE(Non Resident External Rupee) Account Housing Loan Canbank Remit money scheme NRI Consultancy Safe custody NRO(Non Resident Ordinary) Accounts Home Improvement loan Bank Western Union Remittance scheme Safe Deposit Locker FCNR (Foreign Currency Non Resident) Accounts Can Jewel Swift Nomination Facility CanCash (Shares) CanMortgage Rupee Drawing Arrangement Investments Attorney ship services CanMobile (Vehicle CanSite NRI Service Centre Facilities For Returning Indians Loan Against Deposits 16 .

sponsered Scheme (SJSRY & SGSY) Lead Bank Initiative 26 dist Others Jalyoga Scheme SME Business Unit Harikalyana Yojna SME Marketing Unit Rural Resource Development Mobile Sales Van (for helping Women entrepreneur in marketing.Priority credit finance Agriculture & Rural Credit Scheme Education loan & other Priority sector loan Kisan Credit Card Loan For Students Pragiti Grameen bank Loan for Agri-Clinics Laghu Udyami Credit Card Scheme Minor Irrigation Loan Farm Development loan Loan for Retail Traders Loan for solar Water Heating System Gold Loan For Agricultural Purpose Kisan Tatkal Direct Financing to SHGs Lending To MCGs Shreyas Gramin Bank South Malabar Gramin Bank RRB Divison (table 5) Rural Development schemes Rural Clinic service Rural Service Volunteer scheme Govt.) Agri-Business Marketing unit Agri Consultancy services Krishi Mitra Card Scheme Finance to NGO/MFI for onLending to SHG CED for Women General Credit Card Social Banking 17 .

In terms of business it is one of the largest nationalized commercial banks in India. 2. Canara Bank has a reputation as a top quality service provider to its customers and it believes in the centricity of its customers. of India and mutual fund/other institutions 5. BSE and Bangalore Stock Exchange. 73.6) OWNERSHIP PATTERNS The board consists of a whole time Chairman and Managing Director and two executives director and one director representing Govt. of India and one representing Reserve bank of India and four part times Non-official Director.75%.2.17% of its share his held by Govt. It has its Head office in Bangalore along with 34 circle offices and 1 international division. Canara Bank has international division which supervises the functioning of its various foreign departments to give the required thrust to foreign exchange business especially exports and to meet the requirements of NRIs. The bank is listed NSE. Hong Kong. The bank also has international presence in several centers. 18 . Doha.5) AREAS OF OPERATION Over the years.33% and public ownership is 17.75% private corporate bodies 3. Moscow. including London. Shanghai. and Dubai. Canara bank is a public sector undertaking (PSU). spread over 25 States/4 Union Territories of the country. Canara Bank of India has a network of 3046 branches.

Ownership Pattern of Canara Bank Category Number of shares Promoters Central govt.02 0.96 0.89 1983985 0.12 20056041 4.58 300000000 (table 6) % of equity 73.10 7./state govt Institutional Investors Mutual funds/UTI Financial institutions Insurance companies Foreign Institutional Investors Non institutions Bodies corporate Individuals Individual shareholders holding nominal share capital up to Rs. Trusts Clearing Members Non-resident India Total 5560 74085 252308 410000000 0.06 100 489984 0. 1 lakh.00 0.48 8070610 420940 31064973 47581514 1.17 11. 1 lakh. Individual shareholders holding nominal Share capital in excess of Rs.61 19 .

73% Indian public NRI/OCB Trusts Figure 1 20 . mutual funds/UTIs financial instn. Investors 12% financial instn.ownership pattern of Canara Bank Bodies corporate 0% Foreign Instnl./Insurance cos 8% mutual funds/UTIs 2% Indian NRI/OCB public 0% 5% Trusts 0% central/state Govt. Investors Bodies corporate central/state Govt./Insurance cos Foreign Instnl.

The products of the bank are Loans Credit Cards. The State bank of India is 29th most reputable company in the world according to Forbes. Investment. 3) Bank of India: It was established on 7 September 1906 is with its headquarters in Mumbai. Bank of India is a founder member of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications) in India which facilitates provision of cost-effective financial processing and communication services. SBI Life Insurance etc. Axis Bank and HDFC Bank. The Bank also has a network of 1.816 ATMs in India and presence in 18 countries. with over 16000 branches. vehicles. It is one of India's leading banks. 2) ICICI Bank: It is India's largest private sector bank by market capitalization and second largest overall in terms of assets. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels. 21 . Government-owned since nationalization in 1969. ICICI Bank is also the largest issuer of credit cards in India. as well as some 24 million customers. State Bank of India is one of the Big Four Banks of India with ICICI Bank. has the largest branch network in India and the bank has 141 overseas offices spread over 32 countries. with about 3101 branches including 27 branches outside India.640 branches and about 4.7) COMPETTIORS INFORMATION 1) State Bank of India: The State Bank Group. Savings.2.

skill & attitude. The loan is sanctioned by the bank authorities if the requirements are fulfilled. Loan can be sanctioned only if the securities pledged are valid and are free from legal considerations. 2.9) WORK FLOW MODEL Figure 2 the loan sanction process The bank has a two way approach in its work flow pattern. else if the loan amount is exceeding the limits of the branch. the person who requires the loan needs to fill an application and submit it to the respective branch authority. Each branch has certain limitations regarding the loan amount.2. Let¶s consider a loan sanction model.  The bank is fully computerized and well furnished with air condition facility to the employees  The bank provides medical facilities to its employees  It also provides educational facility to the employees and their children.8) INFRASTRUCTURAL FACILITY  Canara bank is located in the centre of the city where the bank has multi-floor building where it has separate partition for all the departments. bank needs to check the authentication of the details and information produced by the party.  The bank also provides vehicle faculty or traveling allowances to their employees  The bank also has provided with quarters facilities to its employees (officers). the request is forwarded to the circle office or the 22 .  The bank has established its own training centre to develop the employees¶ knowledge.

Ministry of Micro.  Excellence in the field of Khadi & Village Industries in South Zone for the year 2006-07. The order (approved/rejected) is sent back to the respective branch.  Best Corporate Social Responsibility Practice Award.for PR Excellence'. a pioneer in Quality Revolution. at its Employer Branding Talent Management Congress held on 22nd and 23rd August 2008. and hence sent to the person.10) AWARDS/ACHIEVEMENTS  First National Award.  µGolden Peacock National Training Award-2007¶. New Delhi. 2. NASSCOM and Times Foundation. the largest rendezvous of HR Professionals. instituted by Khadi & Village Industries Commission. Delhi. instituted by Public Relations Council of India.  'The Organization of the Year Award. an award conferred by the Asia Pacific HR Congress.head office.  Received during 2008-09Conferred 'First Rank' in India's Best Banks awards under the category 'Strength and Soundness' for 2006-07 by a survey conducted by Ernst & Young. instituted by the Ministry of MSME. 23 .  Conferred the Business Super brands Status for 2008. instituted by BSE.  Golden Peacock National Training Award 2008 for excellence in training. The figure above provides a clear understanding of the same. Govt. The circle or the head office verifies and approves or rejects the proposal. (REGP) of Khadi and Village Industries Commission (KVIC). Canara Bank is the first PSB to receive the award since its institution in the year 1991.  Best Performing Bank under Rural Employment Generation Programme. Government of India. instituted by the Ministry of Micro.  'Golden Peacock Award for Corporate Social Responsibility' for the year 2007. in South Zone for the year 2007-08. instituted by the Institute of Directors.  Global HR excellence in Training. Small & Medium Enterprises. Small & Medium Enterprises. Government of India. of India for 'Excellence in Micro & Small Enterprises (MSE) Lending' for 2006-07.

 The Bank won two Silver Corporate Collateral Awards for Best Corporate Ad in the Print Media and Best Corporate Film on Corporate Social Responsibility at the Public Relations Council of India Awards 2009. with the objective of augmenting profits and profitability. The award was handed over by Dr. Hon¶ble Prime Minister of India  The Bank received the Credit Guarantee Approval Certificate issued by CGTMSE from Shri Pranab Mukherjee. 24 .  The Bank will continue to focus on core business. the Bank is likely to open a Representative Office at Sharjah shortly in addition to RBI approval already obtained in 9 international centres.  Best Bank in South Zone Award for the year 2008-09 in respect of lending under KVIC and PMEGP Schemes.11) FUTURE GROWTH AND PROSPECT  The Bank aims to reach an aggregate business figure of Rs. 2.  Targets to achieve 100% CBS coverage by June 2010  The Bank has plans to open over 200 new branches during FY2011.285000 crore and advances of Rs.5 lakh crore. comprising total deposits of Rs.  Expanding global footprints.Manmohan Singh. Hon¶ble Finance Minister of India.215000 crore.

They give instructions to the executive director and the general manager who in turn give instructions to the lower level managers.2) Skills The important software for the success any organization is the skills of the employees & of the management. The figure below shows the framework. There are hard and soft components. The Canara bank is having highly skilled employees. from top-level management to lower levels.3) McKINSEY¶S 7s FRAMEWORK The Mckinsey¶s 7s plays a vital role for the success of any organization. Among these departments the General Manager division is very large. Fig.1) Structure The design of organizational structure is a downward communication of information in the bank.e. All sectional heads will communicate or report their sectional performance or activities regularly to the general manager. The information flows top down. 3. The chairman and managing director have the sole authority in the organization. It consists of many sections and sub sections. 3: Mckinsey¶s Framework Figure 3 3. The skills of the organization are: 25 . The middle level management consists of general manager and company secretary. i.

on regular basis and take suggestions and ideas given by subordinates. Leadership Style in Canara Bank It has been observed in the Canara bank that the behavior of superior towards the subordinate is pleasant. NPAs/AUCs recovery & reduction in operating expenses to improve efficiency of their operations. Bank has already introduced product like. They motivate fresher who are working under them. pre-sanction & post-sanction supervision. 26 . Technology Skills: Canara bank is having a very good brand equity & loyalty of customers. The object of the work is clearly defined to them.Credit Skills: They face the challenges in improving the asset quality suitable training programs for upgrading the appraisal & credit monitoring skills. The leader takes the final decisions only. superiors who act as leaders conduct meetings.. 3. monitor & manage various risks associated with the Banking business in the areas of credit. etc. personal segment advances & trades finance in order to improve the profitability & to make growth in business volumes more sustainable. The superior tells subordinates what exactly he has to do.. This style of leadership is called conservative leadership. Importance has also been given to areas like low cost deposits. mutual funds. including monitoring of stocks. credit cards. Importance has also been given to area like low cost deposits. presentation etc. Operating Skills: Bank has to increasing non-fund income. Otherwise the superior councils the subordinate.3) Style The style of an organization according to the Mckinsey framework becomes evident through the pattern of actions taken by members of top management team over a period of time. Increasing non-fund income. discussions. financial statements. cross selling of other financial services like insurance. Tele-Banking. interest rate & liquidity. ATMs etc. will be provided. reduction in operating expenses taken sufficient measures to identify measure. The rigor of NPA discipline & provisioning will only increase in the days to come & they have to equip themselves for this task. personal segment advances & trades finance in order to improve the profitability & to make growth in business volumes more sustainable. government securities.

trade finance. Training mainly helps with updating skills. 27 .5) Systems Training System : The Bank under various categories were imparted training in diverse functional areas such as assets liability management. housing finance. The Bank has taken necessary steps to implement structured financial messaging system (SFMS) a modularized software solution for financial message communication in a highly secured environment. consumer credit. Systems and Procedures: Many systems and procedures in the Bank were received re-oriented and simplified during the year without diluting any controls. knowledge improvement etc. rationalization of entire applications in retail lending schemes. The Bank follows the recruitment & selection processes that are commonly followed by public sector Banks. It is also concerned with meeting the challenges posed by the policies and actions of other competitors in the market.3. The Bank adopts its own training system with the help of their training centers. and has initiated installation of ATM¶s in all the areas. rationalization of printing supply and usage of forms. has its own Cheque Processing unit. Recruitment & Selection System: The sources of recruitment at the organization in the form of both external & internal. 3. It involves preparing oneself for meeting unforeseen factors. simplification of documentation against valuable securities. Noteworthy among the initiatives were revision/updating of all ten credit manuals. retail finance Recovery. It has enabled Core-Banking Service. Technology System: The bank has initiated business process re-engineering with an effort to stay at the top in the competition. pilot implementation of single window system at select branches revision of DD payment procedures & streamlining of procedures or scanning of signature at branches.4) Strategy Strategy indicates a specific program of action for achieving the organization objectives by efficiently employing the firms¶ resources.

skill & attitudinal development of the employees.7) Shared values  Improve market share on rural & semi-urban markets.  The wing will continually improve all the processes involved during the performance of the above functions for ³Total satisfaction of customer´ ( Internal) by implementing quality management system requirements of all personal of the Bank as per IS/ISO 9001:2000 28 .  To develop competent and vibrant human work force.  To encourage employees for implementation of office language in their day to day work.6) Staff The bank is motivated to harness the unique assets of the human resources for growth of the institution and to imbibe team spirit for self and mutual development among bank¶s staff.3.  To develop the competencies and skills of the employees through training (Internal & external) and other HRD measures.  To improve the work environment in the bank through welfare measures and healthy Industrial relations. supported by 13 regional training centers spread over length & breadth of the country.  Increase number of performing branches and eliminate below performing branches. Training & Development Canara bank has been a fore runner in establishment of its own training college at Bangalore. 3. These centers take care of knowledge. The bank has made inroads towards establishment of quality circle concept among its employees.  To encourage employees to share knowledge and information about the various activities in the bank through the House Magazine and other publications.

 It has the maximum number of ATM installations among all the nationalized banks summing up to more than 2000 of them at 698 centers  1959 branches of the bank provide Internet and Mobile Banking (IMB) services  µAnywhere Banking¶ services are being provided at 2091 of its branches  All the branches of Canara Bank are enabled with Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) transaction facilities  Bank also offers Personal Banking Services. Strengths  It is the first bank in India to have launched Inter-City ATM network  It is the first bank to have been awarded ISO Certification for providing credit card for farmers for the first time in India along with offering Agricultural Consultancy Services  It has established 3046 branches across the nation as of March of 2010. Weakness  Still sticks to most of the traditional banking systems  Requires training program due to introduction of many new schemes & technologies  Weak research team  Staff take time to get adjusted to the new inventions  Stands 4th position in the nationalized banks ratings 29 . promotion of habit of saving. NRI Banking Services and Priority & SME Credit Services.4) SWOT ANALYSIS The bank had envisioned to not only offer financial services but also fulfill social causes such as removal of superstitions and ignorance. providing assistance to the people in need and develop a sense of humanity among the people. Corporate Banking Services.

to deliver efficient & effective services  To provide extra privileges to the customers to maintain & retain customers  To attract customers with good loan offers at very impressive rates. increasing the competition  Introduction of new technologies in the new banks with high infrastructure  Innovative interest rates & attractive customer care services  Adoption of many technologies & banking systems from abroad  Very efficient research team.  To be aware of the changes in the market. who are always tracking the new inventions in the market  Most of the private banks provide 24hrs facility 30 . to lead the banks into MF transactions  To adapt to the new technological inventions. against the competitors.Opportunities  To improvise on mutual funds. to stay at the top in the competitive market  To provide enough training facilities to the staff. & provide space for instantaneous changes Threats  Establishment of private banks.

5 26.76 27.17 5.57 3.3 11.6 27.46 Payout ratios Dividend payout ratio (net profit) Earning retention ratio 15.65 18.91 31 .82 12.88 84.53 75.89 9.71 4.34 9.29 16.17 34.08 76.85 16.51 81.6 5.62 4.19 9.49 0.65 32.48 24.17 0.77 10.5) FINANCIAL STATEMENT ANALYSIS Ratio Analysis of the Balance Sheet Mar¶ 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 (table 7) Mar ' 05 Per share ratios Reported EPS (Rs) 73.36 22.61 11.26 Liquidity ratios Current ratio Quick ratio .63 76.01 26.02 8 33.45 23.6 13.55 2.02 23.99 8 47.06 Dividend per share Operating profit per share (Rs) Profitability ratios Net profit margin (%) 10 73.69 50.32 10.29 0.25 9.10 18.08 18.97 77.29 7 33.55 38.81 Leverage ratios Total debt/equity Fixed assets turnover ratio 18.15 6.19 0.98 0.7 13.64 5.65 17.

equity shares). The value has reduced by the years. 3) Net Profit Margin: (Net Profit before Interest and Tax/Sales)*100. It indicates the relationship between loan funds and net worth of the entity. This ratio checks the economic performance of the entity. It¶s a difficult ratio to be analyzed because the asset values are based on historic costs. The non operating incomes and expenses are ignored for computation of profit before tax.4% over the year 4) Debt-Equity Ratio: (Total Debt/Shareholders Funds). depreciation and interest. Firstly. mostly because costs debited to the P&L account are fixed in nature and increase in sales declines the per unit cost. Below are some of the ratios considered to analyze the performance of Canara Bank over the last 6 years. it has a major affect on decision of dividend policy. 1) Earnings Per Share: (Net profit after tax and preference dividend/No. 5-10. 6) Fixed Asset Turn Over Ratio: (Sales/Fixed Assets). increasing the cash accrual and debt repayment.3% over the last six years.18% over the last 6 years. The values show a declining trend over the years and it¶s considered to be a positive sign.Interpretation of the above ratios: It is a very powerful tool useful for measuring performance of an organization. higher ratio of 3:1 may be permitted for capital intensive industries. There are variations in the values which may be due to replacement of an asset at an increased price or purchase of an additional asset to increase production. It has shown an increase of 81. It has a high impact on the returns to the share holders. 2) Dividend per share: Dividends are the share of profit distributed among the share holders per share. 32 . let¶s consider market based/ per share ratios. The values consolidated in the above table provide a clear view that the net profit has been increasing by the year and it has shown an increase of 172. Generally 2:1 is the norm accepted for financing projects. There has been an increase of 7. The value has been increasing from Rs.

It also measures the company¶s ability to meet its customer¶s obligations.33:1 as the minimum acceptable level for providing working Capital Finance. 33 . It¶s a supplement to current ratio to determine solvency or liquidity of the company. as the values are high in the past years. The banks consider 1. Loans & Advances/Current Liabilities & Provisions). 9) Dividend Pay Out Ratio: (Dividend per Share/Earning Per Share). There has been a little decrease in the ratio. 8) Quick Ratio: (Current Assets. Bank has a considerable liberal policy. 10) Earnings Retention Ratio: this ratio provides the margin distributed to the share holders and the percentage retained. This determines the solvency of the company.7) Current Ratio: (Current Assets. The amount retained may be due to further expansion plans of the company or the investment decisions. bank accounts without proper investments etc. Loans & Advances-Inventories/Current Liabilities & Provisions-Bank Overdraft). but there has been an increase in the year March 2009 which may be due to high cash balance. The values show that the ratio has been decreasing giving a positive sign. mostly due to low profits or changes in the earnings ratio.

PART B 34 .

evolution and growth of microfinance industry. micro-Finance scene is dominated by Self Help Groups (SHGs) . future potential etc. aimed at providing a cost effective mechanism for providing financial services to the 'unreached poor'.1) EXECUTIVE SUMMARY Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new economy. knowing the need of poor. major players regulatory body. products of microfinance their demand and supply. reach to clients. challenges. In India. issues. microfinance institutions continue to grow on the back of their record for low risk and solid returns.Banks linkage programme. with a focus on Canara Bank initiatives. In the Indian context terms like "small and marginal farmers". I have explained Canara Bank¶s portfolio on microfinance and the entire scheme that are adopted by Bank for Financial Inclusion. present situation. " rural artisans" and "economically weaker sections" have been used to broadly define micro-finance customers. whether it¶s no frill account or KCC scheme . starting from defining microfinance. and improve the health and nutrition of their families as the global financial system buckles. In this paper I tried to cover all the aspects of Microfinance industry in India. Impact on poverty alleviation.GCC scheme etc. increase the number of years of schooling their children receive. 35 . over time. Research across the globe has shown that. microfinance clients increase their income and assets.

by providing an alternative to the loans offered by the local moneylender priced at 60% to 100% annual interest. Whatever the form of activity however. 36 . At the same time. the model takes advantage of existing community support systems and networks to encourage financial discipline and ensure high repayment rates with an aim of creating social value.2) MICROFINANCE INTRODUCTION The financially weaker section. shelter. individual lending. The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital for microenterprise.The MF model is designed specifically to help the low income population overcome typical challenges such as illiteracy. Microfinance loans serve the low-income population in multiple ways by: (1) Providing working capital to build businesses. the overarching goal that unifies all actors in the provision of microfinance in the creation of social value. like the rest of society. clothing. 18 to 25 %. and agricultural business development services. and some banks have partnered with public organizations or made small inroads themselves in providing such services. The range of activities undertaken in microfinance include group lending. MF serves as the lastmile bridge to the low-income population excluded from the traditional financial services system and seeks to fill this gap and alleviate poverty. lack of financial knowledge and deficiency of collateralizable assets. NGOs have undertaken the activity of raising donor funds for on-lending. need financial products and services to build assets. capacity building. microfinance prevents the borrower from remaining trapped in a debt trap which exacerbates poverty. and (3) Cushioning the economic impact of shocks such as illness. or natural disasters. and insurance and savings for risk mitigation and consumption smoothing. using a range of MF delivery methods. (2) Infusing credit to smooth cash flows and mitigate irregularity in accessing food. A large variety of actors provide MF in India. theft. stabilize consumption and protect themselves against risks. the provision of savings and insurance. Governments have piloted national programs.e. or education. MF loans in India range in size from $100 to $500 per loan with interest rates typically between 25% and 35% annually by MFIs and much below by banks i. Moreover.

credit and other financial services and products of very small amounts to the poor in rural. in both rural and urban areas´ According to International Labor Organization (ILO). operate small or microenterprises where goods are produced. work for wages or commissions. draft animals. No specific limit for 'small' amount of financial services is envisaged.3) MICROFINANCE DEFINITIONS. According to Robinson. vehicles. and to other individuals and local groups in developing countries. 37 . repaired. ³Microfinance is an economic development approach that involves providing financial services through institutions to low income clients´. This graduation is done through financial and non-financial services. semi-urban or urban areas for enabling them to raise their income levels and improve living standards". recycled. The Task Force on Supportive Policy and Regulatory Framework for Microfinance has suggested a working definition of microfinance as "Provision of thrift. or machinery and tools. gain income from renting out small amounts of land. ³Microfinance refers to small-scale financial services for both credits and deposits ² that are provided to people who farm or fish or herd. The emphasis of support under mF is on the poor in 'pre-microenterprise' stage for building up their capacities to handle larger resources. it lays emphasis on graduating borrowers from pre-mE stage to post mE stage. or traded. provide services. While exclusively covering the poor. Marguerite.

"Microfinance institutions (MFIs) are those which provide thrift, credit and other financial services and products of very small amounts mainly to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards".

MFIs have emerged broadly under three categories: i). Not-for-Profit MFIs Societies registered under Societies Registration Act, 1860 or similar State Acts Public Trusts registered under the Indian Trust Act, 1882 Non-profit Companies registered under Section 25 of the Companies Act, 1956 ii). Mutual Benefit MFIs State credit cooperatives National credit cooperatives Mutually Aided Cooperative Societies (MACS) iii). For-Profit MFIs Non Banking Financial Companies (NBFCs) registered under the Companies Act, 1956 Banks which provide MF along with their other usual banking services could be termed as mF service providers.

Asian Development Bank¶s Micro¿nance development strategy de¿nes

³Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises´.

Microfinance services are provided by three types of sources:  formal institutions, such as rural banks and cooperatives;  semiformal institutions, such as nongovernment organizations; and  Informal sources such as money lenders and shopkeepers. Institutional microfinance is defined to include microfinance services provided by both formal and semiformal institutions.



Micro credit:
It is a small amount of money loaned to a client by a bank or other institution. Micro credit can be offered, often without collateral, to an individual or through group lending. E.g. through JLG, SHG, MCG etc

Micro savings:
These are deposit services that allow one to save small amounts of money for future use. Often without minimum balance requirements, these savings accounts allow households to save in order to meet unexpected expenses and plan for future expenses. E.g. Cansaral accounts

Micro insurance:
It is a system by which people, businesses and other organizations make a payment to share risk. Access to insurance enables entrepreneurs to concentrate more on developing their businesses while mitigating other risks affecting property, health or the ability to work. E.g. insurance for crop, machinery, equipment, animals etc

These are transfer of funds from people in one place to people in another, usually across borders to family and friends. Compared with other sources of capital that can fluctuate depending on the political or economic climate, remittances are a relatively steady source of funds.


There are 3 main factors that count to the bringing up of Microfinance as a Policy in India 1. The first of these pivotal events was Indira Gandhi¶s bank nationalization drive launched in 1969 which required commercial banks to open rural branches resulting in 15.2% increase in rural bank branches in India between 1973 and 1985. 2. The second national policy that has had a significant impact on the evolution of India¶s banking and financial system is the Integrated Rural Development Program (IRDP) introduced in 1978 and designed to be µa direct instrument for attacking India¶s rural poverty.¶ 3. The last major event which impacted the financial and banking system in India was the liberalization of India¶s financial system in the 1990s characterized by a series of structural adjustments and financial policy reforms initiated by the Reserve Bank of India (RBI). The systems and procedures of banking institutions was emphasizing on complicated qualifying requirements, tangible collateral, margin, etc., that resulted in a large section of the rural poor shying away from the formal banking sector. The banks too experienced that the rapid expansion of branch network was not contributing to an increasing volume of business to meet high transaction costs and risk provisioning, which even threatened the viability of banking institutions and sustainability of their operations. At the same time, it was not possible for them to allow a population of close to 300 million - even if poor - to remain outside the fold of its business. The search for an alternative mechanism for catering to the financial service needs of the poor was thus becoming imperative.

The evolution of modern microfinance can be stated with the origin of Grameen bank in the year 1976 and get the independent status of bank 1983 in Government legislations. Dr.Muhammed Yunus was known as the pioneer of this, he is the father of modern microfinance. Later on his model was spread all over the world.


festivals. are living below the poverty line. the segment of the rural population above the poverty line but not rich enough to be of interest to the formal financial institutions also does not have good access to the formal financial intermediary services. education. etc. India's GDP ranks among the top 15 economies of the world. migration. 41 . irrespective of rural/urban status have 3 kinds of needs: 1) Life cycle needs: marriage. natural calamities. only about 20% have access to credit from the formal sector and rest 80% unable to access credit at reasonable rate. small business They have effective demand for a range of Micro¿nance services including: 1) Safe and convenient deposit services ² so they can save for emergencies. and to ¿nance livelihood activities and large expenses for education. around 300 million people or about 60 million households. widowhood.6) DEMAND FOR MICROFINANCE SERVICES Due to its large size and population of around 1000 million. It is further estimated that of these households. etc. and the education of their children 2) Credit services ² for consumption smoothing. accidents etc 3) Investments needs: asset purchase. other family events. However. house construction. consumption. investment. birth. 2) Emergency needs: medical emergencies. housing improvements. theft. It was found that poor and low income households. social obligations. death. 3) Other ¿nancial services ² such as insurance and funds transfer services. old age. including savings services. Additionally.

This segment mainly needs credit for working capital (crop production). and equipment (looms. such as irrigation pump sets. 42 . Technically the second and third segments indicated above are eligible for loans from the banks. groundnut. weavers and those self-employed in the urban informal sector as hawkers. such as livestock. The first segment is the present focus of NGO oriented microfinance institutions. a small part of which also serves consumption needs. using which they can generate additional income. fishery. machinery) and work sheds in case of non-farm workers. These persons are not always poor. 2) The next market segment is small and marginal farmers and rural artisans. construction and transport. mini household industries. 3) The third market segment is of small and medium farmers who have gone in for commercial crops such as surplus paddy and wheat. and workers in household micro-enterprises. and most numerous. and others engaged in dairying. The segment also needs term credit for acquiring additional productive assets. first and foremost consumption credit during those months when they do not get labour work. repair workshops. cotton. tea shops. and manual labourers in forestry. running provision stores. though they live barely above the poverty line and also suffer from inadequate access to formal credit. poultry. and for contingencies as illness.Demand for Credit In terms of demand for micro-credit. This segment requires. this segment includes those in villages and slums. They also need credit for acquiring small productive assets. Women are also one of the important segment for microfinance services. This market segment also largely comprises the poor but not the poorest. engaged in processing or manufacturing activity. etc. bore wells and livestock in case of farmers. there are three segments: 1)At the very bottom in terms of income and assets. vendors. but in reality they have been not covered by the Banking System. Among non-farm activities. are those who are landless and are engaged in agricultural work on a seasonal basis. and various service enterprises.

deter them from using formal channels such as banks. and finally. 43 . The safety of savings is of higher concern than interest rate . death in the family. Insurance by the poor is needed for assets such as livestock and pump sets. Crop insurance could be very useful to the rural poor. as a source of equity or margin to take loans. etc. This comes from the fact that not only incomes of microfinance customers low. In urban areas also this is true. The irregularity of cash flows and the small amounts available for savings at one time. The poor want to save for various reasons ± as a cushion against contingencies like illness. Finally. is also substantial. as shown by the experience of the SEWA Bank. though not very well articulated. particularly women. Demand for Insurance Services The demand for insurance services. are looking for a way to save small amounts whenever they can. as a liquid asset. disability and death would also reduce the shocks caused by such contingencies. but are also highly variable. which lead the poor into taking loans at such times at high interest. in spite of better banking facilities.Demand for Saving Services The demand for savings services is ever higher than for credit. Studies of rural households in various states in India show that the poor. for shelter. calamities. Ahmadabad. insurance against illness.

the estimates on the projected microfinance supply and the arising financial requirement for future growth of microfinance in India are limited. the demand is nowhere near being met. 12804 crore from MFI channel alone) by 2010 was made another projection made by the research and consultancy firm Intellecap for MFI portfolio under three scenarios (low. In this study an estimate of reaching Rs28. Crop and livestock insurance. Supply of Saving Services In the case of savings services. but this has. particularly for small. perversely. are quite expensive and their reach to the poor is negligible. bishis and savings mobilization companies like Peerless and Sahara. theft. also led to legitimate MFIs being not allowed to take deposits and thus provide savings services to the poor. the poor lose their money. most likely and high) ranges from Rs. and loss of assets due to fire. the usage is limited by low awareness among the poor. and there are a large number of low premium schemes covering them against death. However. etc. Transaction costs of savings in formal institutions were high for the rural poor. with little awareness among the customers. 44 .7) SUPPLY FOR MICROFINANCE SERVICES Supply of Microcredit Whereas there are some estimates of demand for micro credit in India. accidents. again while banks have provided access to a large number of small depositors. Many such companies are fly-by night and as a result. natural calamities. 000 crore microfinance portfolio (out of which Rs.29974 crore by 2012. and thus remained scheme driven. Hence the poor turn to other means such as chits. In 2006 Sa-Dhan has made a detailed study and brought out a report on µfinancial requirement for future growth of microfinance in India. Supply of Insurance Services The supply of insurance services to the poor has been increased substantially over the 1990s. Livestock and asset insurance was extended to the poor along with the IRDP subsidized loans. RBI data shows that informal sources provide a significant part of the total credit needs of the rural population. The RBI has tightened up deposit taking activity since 1997. however. 21404. frequent "recurring" deposits.

 NBFCs are registered under the Companies Act. This tendency is a concern due to enforcement problems that tend to arise with self-regulatory organizations. the Indian Trust Act. Regional Rural Banks Act. Absence of liquidity requirements is concern to the safety of the sector.  There is no specific law catering to NGOs although they can be registered under the Societies Registration Act.8) LEGAL AND REGULATORY FRAMEWORK  Banks in India are regulated and supervised by the Reserve Bank of India (RBI) under the RBI Act of 1934. There has been a strong reliance on self-regulation for NGO MFIs and as this applies to NGO MFIs mobilizing deposits from clients who also borrow. 45 . 1956 and are governed under the RBI Act. or the relevant state acts. and the Cooperative Societies Acts of the respective state governments for cooperative banks. Banking Regulation Act. 1882. 1860. the RBI essentially created a new legal form for providing microfinance services for NBFCs registered under the Companies Act so that they are not subject to any capital or liquidity requirements if they do not go into the deposit taking business. In January 2000.

Development process through Microfinance fig 4 Donors and Banks Microfinance Government Banks Implementing organizations Individual Awareness/ promotional work Individual Consolidation of SHGs Microenterprises Microenterprise Savings Credit Delivery Recovery Consumption need Follow up monitoring Production need Income generation Farm related (sustainable and growth oriented ) Non farm related Self sustainability of SHG Economic empowerment through use of microcredit as an entry point for overall empowerment 46 .


SFMC's mission is to create a national network of strong. The bank¶s vision is ³to facilitate sustained access to financial services for the unreached poor in rural areas through various microfinance innovations in a cost effective and in sustainable manner. NABARD was a pioneer in microfinance programs in India. RASHTRIYA MAHILA KOSH In 1993. NABARD has also collaborated with NGOs.310 million to act as a provider of wholesale funds for the sector and to develop the sector through capacity building and advocacy. banks and governmental agencies in order to use other models of rural credit like the Grameen Model and the Individual Banking Model. 48 . the Ministry of Human Resource Development.9) MAJOR PLAYERS The major players which were instrumental in the growth of microfinance industry in India includes NABARD. NABARD NABARD was established in 1982 to provide credit to the rural sector. especially women. viable and sustainable Micro Finance Institutions (MFIs) from the informal and formal financial sector to provide micro finance services to the poor. MFIs. FWWB and SHARE Microfin Limited etc.´ By 2005 NABARD SHG Bank linkage programme had emerged as one of the largest microfinance programs in the world. SIDBI. Government of India set up the Rashtriya Mahila Kosh (RMK) with initial funding of Rs. SIDBI SIDBI Foundation for Micro Credit (SFMC) was launched by the Bank in January 1999 for channelizing funds to the poor in line with the success of pilot phase of Micro Credit Scheme. Rashtriya Mahila Kosh.

10) GROWTH OF MICROFINACE 1960s ± 1980s Phase 1 Social banking  Nationalization of private commercial banks. 2000 (table 8) Phase 3 Financial inclusion  NGO-MFIs SHGs are gaining more legitimacy.  Expansion of rural branch network.  Establishment of apex institutions like NABARD. SIDBI etc 1990s Phase 2 Financial system approach  Peer pressure  SHG Bank Linkage  Establishments of Microfinance Institutions especially of Nonprofit origins.  Establishment of RRB.  MFIs emerging as strategic partners to diverse entities interested in the low income segment. 49 .  Increased policy regulation.  Extension of subsidized credit.  Consumers finance emerged as high growth area.  Increasing commercialization.

5 million > RS 100 crore < 30 crore Promoters equity and commercial equity capital Institutional Institutional loans + buyout Moderate loans. Most of them are for-profit NBFCs previously as an transformed NGO for several into NBFCs years Total Outreach Typical Portfolio Nearly 10 million 2-5 million ~= RS 50100 crore Have availed Source of equity Most have availed or are of commercial equity capital looking for commercial equity capital Source of debt funds Leverage Institutional loans + buyout Moderate < 1 million ~= RS 30-50 crore Dependent on donated equity and µsocial¶ investors < 0. Institutional loans + buyout grants High Low 50 .Classification of MFIs in India as at the beginning of FY 2010 Tier 1 5-6 large NBFC MFIs that have 10-15 midTier 2 Tier 3 500-800 NGO MFIs that have been growing New age MFIs (table 9) been in operation sized MFIs Description as NBFC for 6-10 that have years and recently 5. soft loans.10 MFIs promoted recently by professionals who are convinced steadily and face of the opportunity at the µbottom difficulty in borrowing from banks of the pyramid¶.

equal amounts Range: 24-36%. occasionally less. Reinforced by joint liability (Grameen) with other clients or peer pressure arising from membership of a community group revolving its own as well as borrowed funds (SHGs. cooperatives). Some MFIs charge lower rates but suffer from poor sustainability as a result. sometimes greater Monthly or weekly Installment ± usually fixed. Loan term Repayment Interest charges Usually 12 months. usually levied as a flat charge.Characteristics of Microfinance Delivery Models in India Financial Characteristic Credit Loan amount Description Service (table 10) Determined by the longevity of the client¶s association with the MFI. assists in the verification of claims 51 . A reserve fund is created for the purpose or insurance is bought from the organized sector on behalf of the client Animal Usually linked with a formal insurance company which obtains bulk business from the MFI while the latter provides the service of premium collection. Voluntary savings often require some notice of withdrawal Interest paid Insurance Life Most programmes pay 4-6% interest (not consistent) Some MFIs are starting to offer life insurance covering client loan repayments plus a small payment to the family in case of the death of the client. occasionally also voluntary Some MFIs now offer long term fixed deposits. Collateral No physical collateral but often linked to some compulsory savings component which acts as financial collateral. Some MFIs also create reserve funds to cover the risk of default Savings Amount deposited Grameen: Compulsory ± usually a fixed proportion of the repayment installment SHG: Compulsory ± fixed amounts per (weekly or monthly) meeting to be deposited as part of the group fund. Not often directly related to the credit needs of the borrower. partly to simplify calculations for both the MFI and the client. Withdrawals Compulsory savings cannot be withdrawn except when the client leaves the group.

The members are self selected. The composition of membership is mainly exclusively male or exclusively female (as of now in India more than 90% of the SHG members are female only). With the liberty to chose their group depending on their level of affinity with other potential members. systems setting and development linkages. The group mobilizes savings among members and meets the need based loan of members out of the pool of fund created.11) MICROFINANCE DELIVERY METHODOLOGIES The sheer geographical size of the country. The NGO meets regularly. mostly weekly at an appointed time and places to carries out its financial transaction of savings and credits. Thus while SHG provides members with financial services. sustainable institution. training. Thus the basic designs of SHG are robust and make it easy for the NGO facilitator to build it into a strong social and financial institution. a wide range of social and cultural groups. 52 . Some of the common models used in India are 1) Self help group model 2) Grameena model 3) Cooperative/mutually aided cooperative model 4) Non banking company finance model 5) Bank using other agencies for distribution of microfinance 1) Models of SHGs in India SHGs are small (membership of 10-20 persons) informal groups that have socially and economically homogeneous membership of poor people drawn from the same hamlet or from nearby hamlets. the large spectrum of economic classes and a variety of NGOs movement has contributed towards the diversity of microfinance models in India. the NGO facilitator builds system that makes the SHG a viable. Once the basic group is identified. the NGO provides them with support services.

meetings are very structured and a bank assistant attends this meeting Some of the significant elements of this model are  Low transaction cost  No collateral. This has contributed to the bank to have low cost credit and attracting low cost of funds from the Govt.peer pressure  All kinds of loans.. Some of the salient features of Grameeen Bank model are mentioned below:  Homogeneous affinity group of five members are formed at village level  The field worker facilitates the process of group forming  All the group member undergo a compulsory training  Some group members undergo a Group Recognition Test (GRT)  Eight joint liability group are affiliate together to form a centre  The centre meets every week.2) The Grameen bank model The Grameen bank methodology has been a case of exceptional success. regular and short intervals  Quick loan sanctions-minimal formalities and paper work The most remarkable aspect of Grameen Bank is its loan recovery rate. many organizations in India like SHARE Microfin Ltd. Though the Grameen Bank evolved in methodology in Bangladesh. 53 . in the range of 98% and above. and International donors. Activist for social Alternative (ASA) and CASPHOR Financial and Technical services Ltd have adopted methodology with slight variations.productive and consumption  Repayment in small.

the NBFC route have been chosen by MFIs operating for profit. One of the best examples is BASIX. This approach has realized on a credit union model involving a µsavings first¶ strategy. Since registered as a bank is costly and local area bank (LAB) idea has not been pursued beyond the initial level approval.  A set of geographically contiguous cooperative federate to form an association of women¶s/men¶s thrift cooperatives. 54 . 4) Non banking Financing Companies It has emerged as a nearest substitute to being a fully fledged bank for those MFIs who want to go for profit route. collect group savings. It has built up a network of financial cooperatives based upon women¶s and men¶s thrift groups. but over time it encourage these small units to merge into larger units as it felt that smaller units are not viable  Each group has a leader.3) The cooperative /mutually aided cooperative model The organization that has been the most successful in using cooperative forum in rural micro finance in India has been the Cooperative Development Forum (CDF). who convenes the group meetings.  It has started off by promoting much smaller units. Hyderabad. a new generation NBFC that has been promoted for promoting tailor made financial services for the poor.  All the members of the primary cooperative constitute the General Body with a 12 member board of directors who are elected for a three year term and adopt a uniform set of bylaws. The main features of CDF system are as follows:  The primary entities are the women¶s/men¶s thrift cooperative which consists of 300 members usually from the same village. and monitor repayment of loans.

. India is considered as the World¶s Largest Market. The SHG loan outstanding has increased by Rs. While last year¶s report focused on the increased risk in the sector. MFIs so far reached 234 of the 331 poorest districts identified by the government. 71. Distribution of MFIs is heavily concentrated in South India but the share of the East is growing.This has resulted from competitive pressures and aggressive growth of the largest MFIs together with a slowdown in the availability of funds from commercial banks to all but the largest MFIs.5 billion. MFIs in the North and the West have become less important but.3% growth in 2008-09).6% per annum in 2006-08 to just 29.The Largest 5 MFIs grew at 71.50 a day.54 billion.MFI¶s have recorded about 8. the larger institutions in the south and east have started to expand North and West. often without adequate documentation or collateral.000 rupees.000 crore or over $1. Most microfinance loans in India range from 5.6 million clients against last year¶s 59 million. this years¶ report takes stock of the uninterrupted growth rate of the sector despite several internal and external adversities. according to the ³State of the Sector Report´ September 2009. people are being lent to at 150 percent of the value of their enterprises. The MF penetration index shows especially in Bihar. Today 25 million Indians have taken so called microfinance loans. In rural India. The total outstanding microfinance loans posted a growth rate of 30% or 359.5 billion with an addition of 6.39 billion over the last year¶s level of Rs 229.5 million clients during the year 2008-09. while the Next10 MFIs slowed down substantially (down from 71. MFI loan portfolios grew by a factor of nearly 35 between 2002 and March 2009 reaching a figure of around Rs 8.6% earlier). The country. is the world¶s largest microfinance market.9 million clients. The share of the Top10 MFIs increased 55 .000 rupees to 20. Karnataka and Tamilnadu.12) PRESENT SITUATION India¶s Microfinance institutions reached 76. Interest rates range from 18 percent to 35 percent . MFIs have increasingly shifted towards Grameen-type programmes at the expense of SHG-based programmes (SHG). More than 50 percent of low income households are covered by some form of microfinance product.7% in 2008-09 (compared to 59. Rajasthan and Uttar Pradesh compared to extraordinary levels reached in Andhra Pradesh. where more than 600 million people live on less than $1. according to Micro-Credit Ratings International Ltd. a growth of 60% over the previous year. Madhya Pradesh.

6 130% 113% 61.8% in 2004 to 12-13% in recent years is a result of the fast growth of these organizations. This means that Indian microfinance borrowers are now paying a relatively high cost for their microfinance loans.10% 86.3 4.from 43% in 2002 to over 72% in 2009. (table 11) GROWTH IN INDIAN MICROFINANCE SECTOR Year ending march 31 2004 2005 $252 2006 $496 2007 $824 2008 $1535 2009 $2346 Outstanding portfolio($ millions) $80 Growth rate Borrowers (million) Growth rate 1 215% 96. Average outstanding loan balances have increased from Rs 3. Analyzing this issue by MFI organizational form shows that it is the NBFCs.5% in 2008-09. the Top10 average yield has risen to 33. Indian microfinance continues to be the most efficient in the world.80% 59.9 7. the operating efficiency of Indian MFIs measured by the average operating expense ratio declined further. despite the improvement in OER over the past few years. Yet.20% 79.80% 2. This compares with a median OER of 15.1% globally. This is caused mainly by the increase in yields of the largest MFIs. have not improved their efficiency over the past few years. the yield on portfolio of Indian MFIs has risen significantly. higher than the global median ± a reversal of the earlier situation when Indian MFI clients paid the lowest cost in the world ± just 25% in 2006. from 15-16% in the mid-2000s to 11.20% Source: Microfinance India State of the Sector Report 2009 56 .300 ($72) in 2002 to Rs 5.30% 52.80% 66. as a group that is charging the highest rates.2 22.0% for Asia and 18. The Top10 MFIs.6% by March 2009 .300 ($104) with average disbursements of Rs 8.the extent of the widening margin is apparent from the figures below. The increase in OER for the Top10 MFIs from 10.500 ($173) in 2009.9 14. however.

000 $1.346 $2.58% from 2004-09 and number of borrowers has increased by 95. 57 .6 20 14.535 $1.500 outstanding portfolio(in millions) $1.outstanding portfolio(in millions) $2.2 borrowers (million) 7.000 $496 $500 $80 $0 2004 Figure 6 $824 $252 2005 2006 2007 2008 2009 borrowers (million) 25 22.9 4. This shows the increase business of microfinance .57%.9 5 2.3 1 0 2004 Figure 7 15 10 2005 2006 2007 2008 2009 Analysis: It can be analyzed that the outstanding portfolio for loan has been increased by 96.500 $2.

10)Grameen service Pvt.Ltd.Ltd. NBFC JLG 363 4944 694350 475 Dharmasthala Karnataka trust SHG 22 4060 612482 157 6)Bhartiya Samrudhi Financial Ltd 7)Bandhan Hyderabad A. NBFC JLG 1413 18227 2590950 2395 Hyderabad A.P. Sec 25 compan y JLG 247 1431 303935 93 Tiruchirapallli Tamilnadu NBFC JLG 126 1316 288311 231 Bangalore Karnataka NBFC JLG 62 1287 153453 127 58 . NBFC JLG individual 696 11987 1668807 1225 3)Spandana Sphoorty Financial Ltd 4) Asmitha Microfin. Varanasi U.P. NBFC JLG individual 666 8568 12351556 1448 Hyderabad A.P. Ltd. NBFC Diversifie d 87 3882 457668 317 Kolkata W. Society JLG 385 3389 851713 435 8)Casphor Microcredit (CMC) 9)Grama Vidyal Microfinance Pvt.P.P. 5)SKDRDP Hyderabad A.B. of branches Loan outstanding (Rs mn) (table 12) Borrower no Net worth (Rs mn) 1)SKS Microfinance Ltd 2)Share Microfin Ltd Secundrabad A.THE BIGGEST MFI IN INDIA Name of MFIs Headquarter Legal status Lending model Source: M-Cril ratings 2009 No.P.

51 No.46 1609586 12253.1 Savings of SHGs with bank as on 31 March Bank loan disbursed to SHGs within the year 1227770 8849.7 59 .87 978887 5861.5 25.72 6.84 16.5 3625941 16999.3 8.4 O/t of which SGSY 916978 4816.Bank financing indirectly to SHG.31 31. consists of smaller group compared to SHGs. The NGO accepts the contractual responsibility for repayment to the Bank. of SHGs %Growth 22.5 33.39 809.Bank directly financing SHGs with NGOs acting as facilitator (most popular model) 3) NABARD-Bank-NGO-SHG Model.3 38. of SHGs 2008-09 6121147 1505581 Amt (crore) 2008-09 5545. (table 13) Particulars No.Overall Progress under Microfinance during the last two years A) SHG ±BANK LINKAGE MODEL 1) NABARD-Bank -SHG Model.22 7.74 264653 2015.62 1563.5 21.Bank directly finance the SHG without the intervention/ facilitation by any NGO. of SHGs 2007-08 Total SHGs Out of which SGSY Total SHGs 5009794 1203070 Amt (crore) 2007-08 3785.91 4224338 22679.5 93.38 No. 2) NABARD-Bank-SHG Model.1 Amt %Growth 46.5 Out of which SGSY Bank loan outstanding with SHGs as on 31 March Total SHGs 246649 1857.

Amt.65 4863921 4434.4 % growth (amt) C) Coverage of Women SHGs The details of total number of women SHGs saving linked. (table 15) Particulars Year Total SHGs Exclusive women SHGs No. (crore) %of women SHGs to total SHGs 31.03. of SHG (2008-09) Bank loan disbursed to MFIs during the year Bank loans outstanding with MFIs as on 31 March 1109 2748.91 78.26 1609586 12253.03.46 77.46 85.2 89. as under.62 No.09 4224338 22679. Amt.08 3625941 16999.51 1040996 7474. credit linked and loans outstanding for the last two years are given in table .33 % growth (No.91 31.BANK LINKAGE MODEL MFI uses two models 1) INDIVIDUAL MODEL -for financing individuals and 2) GROUP MODEL-SHG/MCG/JLG ( table 14 ) Particulars No.39 80.93 2007-08 2008-09 5009794 3785.96 No.26 1374579 10527. of SHG (2007-08) Amt (200708) (crore) No.7 82.79 88.84 60 .09 72.61 3277355 18583.39 6121147 5545.84 1915 5009.58 84.03 79.12 79.B) MFI.45 81.57 79.54 84. (crore) 3986093 3108.38 2917259 13335. of SHG) 12. (crore) Saving linked SHGs Loans disbursed Loans outstanding 2007-08 2008-09 1227770 8849. Amt.15 581 Amt (2008-09) (crore) 3732.46 82.2 518 1970.

quick and high µcustomer satisfaction among beneficiaries of microfinance has attracted most of NGOs to this trade. 2) Supply push . RGVN. has greatly added. RMK. the interest rate spread could be an attractive source of revenue than an uncertain.13) SUCCESS FACTORS OF MICROFINANCE IN INDIA Over the last ten years. A. and lately commercial banks. entry and exit are easy. 5) Finally. NGOs and grass root savings and credit groups around the world have shown that these microenterprise loans can be profitable for borrowers and for the lenders. highly competitive and increasingly difficult-to-raise donor funding. It is implicitly assumed that no µtechnical skill¶ is involved. UK. that is microfinance is canvassed by various factors. donor NGOs too have been funding microfinance projects. for example from SIDBI. SIDBI. external resources are not needed as SHGs begin with their own savings. Those NGOs that have access to revolving funds from donors do not have to worry about financial performance any way. World Bank and Department for International Development. microfinance is a way to financial sustainability. UNDP. CAPART. when given access to responsive and timely financial services at market rates. The most common route followed by NGOs is promotion of SHGs. FWWB. Especially for the medium-to-large NGOs that are able to access bulk funds for on-lending. 3) The concrete results and sustained interest. Induced by the worldwide focus on microfinance. successful experiences in providing finance to small entrepreneur and producers demonstrate that poor people. 4) The idea of implementing microfinance appears simple. making microfinance one of the most effective poverty reducing strategies. 61 . tasks are (perceived to be) simple and people¶s acceptance is high. field itself requires new ideas and NGOs more readily adopt new ideas especially in the above situation mentioned. repay their loans and use the proceeds to increase their income and assets. various donor funded programmes especially by the IFAD. For NGOs: 1) The resources required of microfinance is small. including the NABARD. Besides. Community banks. to many NGOs.

5) Bank-groups are motivated by a number of cross-selling opportunities in the market. 2) The process helps the banks to meets its priority sector targets. For Financial Institutions and banks: Banks have several advantages over nonbank. 62 . 8) Their ownership structures of private capital tend to encourage sound governance structures. remittances and eventually mutual funds. they do not have to depend on scarce and volatile donor resources (as do NGOs). for deposits. financial disclosure. and profitability. 6) Many have physical infrastructure. 7) They have well-established internal controls and administrative and accounting systems to keep track of a large number of transactions. deposits. 4) They are regulated institutions fulfilling the conditions of ownership. and capital adequacy that help ensure prudent management. MF has much more favorable terms. Since the larger banks are offering all these services now through their group companies. Cost-effectiveness. it becomes imperative for them to expand their distribution channels as far and deep as possible. all of which lead to sustainability. 9) Because they have their own sources of funds (deposits and equity capital).B. 3) Comparison to other rural lending by banks. from which to expand and reach out to a substantial number of microfinance clients. attractive to a microfinance clientele. in principle. insurance. micro lending institutions 1) They offer loans. in the hope of capturing the entire financial services business of a household. including a large network of branches. and other financial products that are.

COMPARITIVE ANALYSIS OF MICROFINANCIAL SERVICES OFFERED TO THE POOR Parameter Money lender (table 16) Commercial bank Govt sponsored bank Financial products of MFIs Ease of access Transaction cost of access Lead time for loan Repayment terms Interest rates Repeat borrowings Loan access procedures Loan application procedure Collateral and demand promissory notes incentives none none mandatory Required but hypothecation of asset may suffice Not required although a charge on the asset becomes automatic None Not required social collateral is used for physical collateral Repeat and larger loans. interest rebates Informal but exploitive Very quick Exorbitantly high Low and very affordable possible Possible but not likely Extremely time consuming and complicated Exhaustive and complex Low . affordable and subsidized Possible but not likely Extremely time consuming and complicated Exhaustive and complex Simple and informal Reasonable and affordable Stream of credit is assured Simple and quick Fixed and rigid Fixed and easy Fixed and easy Flexible Very short Extremely long Extremely long Short High low low Very high low Very high High High-medium 63 .

In conjunction with this goal. India has one of the lowest average loan sizes of around $150 as well as the lowest yield on portfolio of 21. Indian MFIs have succeeded not only in comfortably covering costs. which seek to genuinely foster financial inclusion among the poor and alleviate poverty. According to a MIX market study. This highlights Indian MFIs¶ operational efficiency and ability to function on tight budgets. the Indian financial system as a whole has demonstrated its long-term confidence in the industry through its own investment choices. but they offer significantly larger loans with interest rates typically between 40-65%. Moreover. The small loan size combined with the low interest rates testify to the social inclination of Indian MFIs. has emerged as one of the most socially conscious. over 90% of the funding in India comes through domestic channels.14) INDIAN MICROFINANCE AT GLOBAL CONTEXT Indian microfinance with one of the highest growth rates globally since 2002.2%. but also returning healthy profits and Return on Assets (ROA). The inherent efficiency and resiliency of the Indian microfinance industry proved critical during the recent financial meltdown during which growth continued unabated despite a slowdown in the flow of funds which negatively affected growth in microfinance in other markets around the world. This demonstrated self-sustainability is prognostic of the long term viability and potential of the sector. 64 . highlighting confidence in the underlying business model and expectations of high future growth and returns. and financially sustainable. Whereas the global average of domestic investment in microfinance hovers around 65%. MFIs in other countries such as Brazil and Mexico have higher profit margins. commercially viable.

enhancing opportunities for their individual growth. decision-making in the household and the community. women headed households. There is some evidence for the reverse. has not reduced either the business or the terms of moneylenders.15) IMPACT OF MICROFINANCE 1) Microfinance Enhances Choices Available to the Poor Microfinance has enhanced the opportunity to save and to acquire a productive asset. 5) Impact on poverty These are clear effects of microfinance. But it has helped in reducing poverty for some clients. Microfinance. economic activity. needed for medical costs). needed to meet marriage obligations) or for amounts needed urgently (for example. 65 . Such very poor households may struggle as MFI clients and their vulnerability can lead to dropout. but whether they are sufficient to move households out of poverty is unclear. or borrow to repay according to the installment schedule. Nevertheless. one-third of µold¶ client households borrows from moneylenders especially for larger amounts (for example. 2) Microfinance can Help Clients in Coping with Vulnerable Situations Building of assets. Nevertheless. existing indebtedness) who are the least creditworthy. that microfinance may in fact increase informal money lending. reduced dependency on moneylenders. new livelihoods and accumulated savings help the coping strategies of the poor. so far. but not for all. fewer client households are borrowing small loans from high cost informal sources. and reduced the interest burden on total borrowings. 4) Microfinance Helps in Reducing Client¶s Dependence on Money Lenders (though use of this source continues) In comparison with non-clients. It is the most vulnerable (those with irregular income sources. 3) Microfinance can be an Empowering Opportunity for Women Clients Targeting women for financial services is a good start on the road to women¶s empowerment. if clients need to 'top up' micro-loans.

both Legitimate and Illegal Although the interest rate offered to the borrowers is regulated. thus making it less attractive to the borrowers. The result of these two laws together is that rural credit has been a monopoly of state owned institutions. Thus the mainstream institutions feel that these loans are risky. and a majority of them needing consumption loan and a majority of them requiring high documentation and collateral security. 3) High Transaction Costs. The RRB Act does not permit any private share holding in any RRBs.16) ISSUES RELATED TO MICROFINANCE Some of the main issues are discussed below: 1) Borrower Unfriendly Products and Procedures With a majority of the customers being illiterate. Also small loans have been used as a tool for disbursing political patronage. the documents to be furnished etc. plus the illegal charges to be paid result in increasing the cost of borrowing. 2) Inflexibility and Delay The rigid systems and procedures result in lot of time delay for the borrowers and de-motivate them to take further loans. and the Cooperative Act of all states do not permit district level co-operative banks to be set up except by the state government. 5) Legal and Regulatory Framework The policymakers feel that farmers and poor people need low interest and subsidized credit. 66 . 4) Social Obligation and not a Business Opportunity Micro-finance has historically been seen as a social obligation rather than a potential business opportunity. they are unwilling to repay the loans. undermining the norm that loans must be repaid. difficult to serve and have a low or negative net spread. the products are not reaching the rural poor. They believe that poor cannot save. and the administrative costs of servicing them are high. the transaction costs in terms of the number of trips to be made.

wef April 1999.e. most of the ternate MFIs achieve a lot of success in their programs in the initial period.1) Inappropriate Legal Forms NGOs invented micro-finance but NGOs are not the best type of agencies to carry out microfinance on a long-term sustainable basis. 6. it has the problems of funding that are very limited. they don¶t have the appropriate financial structure for carrying out micro finance activities.Rs 2 Crores. 67 . but they fail to maintain the same record in the long run because of lack of commercial orientation thus making it unsustainable. they violate section 11 (4) of the Income Tax Act and can lose their charitable status under Section-12. A vast majority of them set up as NGOs for getting access to funds as. such RMK and FWWB.6) Problems for Alternative Micro-Finance Institutions The main aim with which the alternative MFIs have come up is to bridge the increasing gap between the demand and supply. Then the cooperatives are politicized in most of the states thus not an appropriate form of incorporation for an MFI. the largest incentive to enter such services remains through the nonprofit route. or NGO promoted SHGs. is to fund only NGOs.2) Lack of Commercial Orientation Driving to make the customer¶s credit available at low cost with subsidies and grants. it has the problems of minimum entry-level capital requirement i. The main problems faced by these institutions are: 6. the existing practices of mainstream financing institutions such as SIDBI and NABARD and even of the institutions specially funding alternatives. It is difficult to mobilize any borrowings from Indian Financial Institutions due to the negative image of NBFCs in general. The MFI taking loan in foreign currency loans are subject to exchange risks. which is very difficult for an MFI to mobilize. The latter requires a license and a minimum start up equity of Rs100 crores. That leaves an MFI with the choice to be incorporated as a company and then become an NBFC or a Bank. If an MFI opts to become an NGO. They don¶t have equity capital and If the NGOs earn a substantial part of their income from lending activity. If an MFI opts to become an NBFC. As a result.

4) Isolated and Scattered Alternate MFIs are isolated and scattered.3) Lack of Proper Governance and Accountability Governance and accountability are limited in case of non-profits and need to be improved. Their boards must be made aware of their financial liabilities in case of failure. 6.6. 68 . There is no proper coordination among them and also there is lack of information dissemination. The lenders should be more stringent and insist on nominating a few directors.

Artisans. namely access to payments and remittance facilities. Canara Bank has grown into a veritable giant in the Banking firmament with well over 3046 branches and a business of over Rs. 00. 4. serve the common man. the CANSARAL savings accounts (No Frills account) Scheme and General Credit card Scheme.Now. 69 . and has never wavered all through its journey of a Century of years and more . loans and Insurance services at affordable costs to those who tend to be excluded was the main concern for bank.One of the first Public Sector Banks to introduce Education loan Scheme in 1978 that Pioneering efforts in Self Help Group Credit linkage in 1990s and has credit linked more than One and a half lakh Self Help Groups until now Specific financial products developed to the focus groups like marginal & Tenant farmers. The Bank that had chosen as its path to serve the social cause. even today a vast segment of the society remains vulnerable and excluded from the opportunities & services provided by the financial sector. Law. There should be a process of bringing the disadvantaged. underserved and those generally from the weaker sections of the society into the fold and the efforts on inclusion shall be across all segments of the society and regions but shall have a focus on underserved regions and underserved communities.The Bank set up an Education fund in 1952 to help deserving poor to pursue studies in Medicine.Financing Agriculture had been taken up as a mainstream activity since early 1960s. However. Launched the Housing Loan Scheme for Lower income families in 1956. As a responsible corporate entity Canara Bank realize and share the concern that continuous exclusion is bound to have social ramifications besides lopsided and inequitable economic prosperity.000 Crores.employed women entrepreneurs . and Engineering etc.17) MICROFINANCE AT CANARA BANK Financial Sector has made substantial progress since Nationalization and particularly at a rapid pace since the beginning of the financial sector reforms. savings. Self. The delivery of simple and key Financial Services. Financial inclusion shall graduate the excluded to economic freedom through capacity building and as entrepreneurs of economic activities and enabling factor in the country's goal of an inclusive growth.

Through¶ MFI: 167 Total MFIs: 11544 Lakhs.03. 95060 Lakhs Microfinance portfolio of Canara Bank (fig in through MFIs lakhs) 11544 12% through NGO facilitation 20861 22% direct lending through NGO facilitation through MFIs direct lending 62655 66% Figure 8 70 .62655 Lakhs.2009 Direct lending: 95490 A/cs . Through¶ NGO Facilitation: 28720 A/cs 20861 on 31.Canara Bank's Initiatives Micro Finance portfolio of Canara Bank. on 31.2010 Through MFI 13894 14% Through NGO Facilitation 21093 20% Direct lending 68435 66% Direct lending Through NGO Facilitation Through MFI Figure 9 Analysis: It can be seen clearly that the Canara Bank¶s share in financial year 2009 is more through direct lending. 103422 Lakhs Micro Finance portfolio of Canara Bank.i. 44% more through NGO facilitation and 54% more through MFIs.03. Similarly in the year 2010 the share through direct lending is 46% more through NGO facilitation and 52% more than MFIs. 71 .Micro Finance portfolio of Canara Bank. Through¶ MFI: 101 Total MFIs: 13894 Lakhs.2010 Direct lending: 95290 A/cs ± 68435 on 31.03. Through¶ NGO Facilitation: 28638 A/cs ± 21093 Lakhs.

The products and the scheme launched by the Bank recently and the existing products aiming financial inclusion are 1) Cansaral Savings Account/ No-Frill Account These are a kind of savings account that can be maintained with zero balance.06% from 2007-08 to 2009-10 in the microfinance portfolio. cheque book facility etc.000 and the total credit in the year is not expected to exceed by Rs 1.20 % as well advanced to SHGs has been increased 76. the account holder can¶t keep more than Rs 50. 72 .28% from 2007-08 to 2009-10. in same way there focus is on agricultural credit also and that has shown an increase of 39. They are provided with free ATM cum Debit card facility. and can be opened with an initial balance of Rs 25.000.00.Canara Bank lending to priority sector 70000 60000 50000 40000 31074 30000 20000 10000 526 786 926 0 advanced to agricultural credit advanced to SHGs SMEs advances priority sector Figure 10 59310 48763 43203 year 2007-08 year 2008-09 year 2009-10 25052 20144 17996 23823 18600 Amt in crore Analysis: From the above graph it can be easily analyzed that the advanced to priority sector has been increasing year by year and this growth is 37. rate of interest is same as that of saving bank accounts. free internet and mobile banking.04% from year 2007-08 to 2009-10 and also to SME advances has shown an increase of 67.

3) Scheme for Prepayment of Debts of Urban poor from Non-institutional Sources This is for the distressed urban poors who have in the past raised loans from non-institutional sources and the loan quantum is 150% of the gross income subject to a maximum of Rs 50.000 and repayment term is monthly in 5yrs with interest. It can be sanctioned for any general purpose including consumption. 73 .of a/c till Mar 2009 cumulative no of a/c till Mar 2010 500000 450267 188762 124732 64030 0 Cansaral Figure 11 1000000 GCCS Analysis: The cumulative number of Cansaral accounts has shown a 384% increase from the financial year 2008-09 to 2009-10 and the number of GCC accounts has been increased 194.000 2500000 2179683 2000000 1729416 1500000 no of a/c during the year 200910 cumulative no. The reason for this growth was aggressive marketing by bank and coverage of more and more people under the scheme.2) General Credit Card Scheme It is to provide a hassle free credit to rural/semi urban households without insistence on security purpose or end use of the credit.8% from the financial year 2008-09 to 2009-10. In this the loan quantum should be 50% of that of the net income of the entire household subject to a maximum of Rs 25.

This scheme provides loan for an amount of Rs 15.of a/cs Amt (crore) 48 (table 17) Mar¶10 No.000 to the members of SC/ST who fulfill the DRI norms.of a/cs amt (in lakh) 10000 6500 5000 4000 4800 5000 0 Mar 07 Figure 12 Mar 08 Mar 09 Mar 10 Analysis: The number of accounts under DIR scheme has shown an increased by 104.000 or less in rural areas and Rs 24. For getting this loan the family income should be Rs 18. DIR scheme outstanding Mar¶07 No. This is the only scheme in bank which provides loan at 4% simple interest.4) Differential Rate of Interest (DIR) Scheme Loans can be considered both working capital and term loan for any Agricultural/Allied activity as per various schemes under Agriculture.of a/cs 15974 Amt (crore) 40 17333 Mar¶09 No.of a/cs 27188 Amt (crore) 50 30000 27188 25000 20000 15974 15000 13308 17333 No.of a/cs DIR 13308 Amt (crore) 65 Mar¶08 No. 74 .000 except housing loans and housing loan to an extent of Rs 20.2% by Mar¶07 to Mar¶10 more people are covered under the scheme by doing aggressive marketing and creating awareness among the people.000 in urban and semi urban areas.

Debt Swapping Scheme (table 18) outstanding Mar¶09 No of a/c Debt swapping Scheme 10447 Amt (in crore) 47.19% from the financial year ending Mar¶09 to Mar ¶10. There has not been any significant change but the amt has shown a slight decrease of 13. 75 .61 Mar¶10 No.5) Scheme for Redemption of Debts of Farmers from Non-institutional sources Its main purpose is to prepay the debt availed by the farmers from non institutional sources so as to relieve the farmer from debt burden from non-institutional sources and the loan quantum maximum of is Rs 50.33 12000 10447 10000 10446 8000 6000 4761 4133 4000 No of a/c Amt (in lakh) 2000 0 Mar 09 Figure 13 Mar 10 Analysis: The number of accounts from Mar¶09 to Mar¶10 is almost same.000 subject to 150 % of the gross annual income. subject to repayment within 5yrs in quarterly/half yearly/yearly installments.of a/c 10446 Amt (in crore) 41.

The objective of the vehicle is to create awareness about Bank's products and Banking facilities among the rural households and enable the Bank branches to design programmes based on feedback on the Bank's schemes and requirements of villagers. to enable even the illiterate persons to have access and operate their account. Branches and farmers' clubs. for financial literacy and education. The booklets are named as 'Money' and 'Savings'. Kolar and Chikkaballapura in Karnataka state. The vehicle is provided with pamphlets covering the schemes of the Bank. 76 . 8) Financial Inclusion and Credit Counseling Centre Bank has started financial Literacy and Credit Counseling Centres (FLCCs) in three Lead Districts. Bellary. 9) Smart Card Technology Bank has piloted Smart card Technology in two villages near Bangalore for financial inclusion. Gulbarga and Chitradurga. 7) Financially Literacy Books Bank has come out with two booklets. Application forms for opening "No frill" accounts and other accounts. 11) Bio metric Voice enabled ATMs The Bank has installed Bio Metric Voice Enabled ATMs in nine rural/Semi urban locations. in English and Kannada. of Karnataka for implementing Smart Cards for disbursement of Government Benefits. Trained agriculture extension officers of the Bank and other staff who are well conversant with the schemes of the Bank and needs of the rural households are accompanying the vehicles to disseminate the information and create awareness. like NREGS wages payment and Social Security Pension in three districts namely. Bio metric ATM card holders and Smart card holders can operate their account through the Bio metric ATMs.6) Canara Grameena Vikash Vahini Bank has provided Canara Grameena Vikas Vahini Vehicles in 50 potential districts across the country. 10) Bank has signed MOU with Govt. namely Chitradurga. The Booklets are made available to the rural people through their Lead banks.

is a unique institute. design and conduct demand driven specific training programmes in the field of agriculture and allied activities. As per the scheme. Apart from the ATM facility. Sonnahallipura Training It was set up in 1993. for providing necessary 77 . farmers' meets . 13) Canara Bank Training Institute for Micro finance. It is engaged in training SHGs and promoting the micro finance concept. like. during total financial inclusion process. the Bank has targeted 20% of the households which were brought to the Banking fold. which has established eight Self Employment Training Institutes across the country. 14) Farmers training Cells With an objective to strengthen the Knowledge base of farming community with necessary technical and marketing skills. Canara Bank has set up Farmers Training Cells (FTCs) through its Canara Bank Centenary Rural Development Trust. agri-seminars etc. for financial deepening under the second phase of financial inclusion. Bank has also taken steps to bring the ATM facility to the doorsteps of the customer. Bank has launched a Mobile VAN with Biometric ATM facility. 15) Canara Nayee Disha Bank has launched a New scheme called "Canara Nayee Disha ³by bringing all the existing eligible credit schemes under one umbrella.12) Bio metric Voice enabled Mobile ATM As a marketing initiative. The Farmers Training Cells plan. The institute has so are trained 10472 candidates. The twin objectives of FTCs are Credit counseling and credit linkage to trained farmers. this mobile Van is having customer lobby where the Bank personnel are available to market/educate the various products of the Bank. This mobile ATM is specially designed for providing ATM facility to the rural folk as well as other customers. This VAN shall move in and around Bangalore city at the pre-determined' clubs. These ATMs are accessible to Biometric card holders also. field exposure visits to progressive farmers' units. demonstrations. technology transfer programmes.

of a/cs 2223 Amt (crores) 7. replacement of machinery and animals etc for which loan quantum is maximum of Rs.of a/cs Krishi Mitra Card 772 Amt (crores) 2. 78 . 50.28 (table 19) Mar¶10 No. oral lessees.88 Mar¶08 No. share croppers etc for cultivation of crops.750 crore. of a/cs 772 288 394 728 amt in lakh Mar'08 Mar'09 Mar'10 Analysis: The number of accounts under Krishi Mitra Card has been increased from the financial year ending Mar¶07 to Mar¶10 by 148% and the amount have been increased by 402% from Mar¶07 to Mar¶10 that shows the aggressive marketing by canara bank after the inception of separate microfinance branch since 2006.94 Mar¶09 No. under the new scheme. maintenance of farm and individually or through group mechanism. Coverage under Krishi Mitra Card outstanding Mar¶07 No.000 subject to value of the produce. 16) Krishi Mitra Card scheme It has an objective to provide easy credit to individual tenant farmers.of a/cs 1516 Amt (crores) 3.48 2500 2000 1516 1500 1000 500 0 Mar'07 Figure 14 2223 1917 1448 no. It is the endeavor of the Bank to provide credit facility to 3.50 lakh households to the extent of Rs.of a/cs 1917 Amt (crores) 14.

donations received and interest earned by SHG. this is because microfinance sector is considered as profitable and bank started aggressive marketing. Bank loan is sanctioned basing on the corpus of the group which includes the savings of the group.07 Mar'10 Figure 15 Analysis: The above graph shows a progressive trend in the SHG group formed that has been an increment of 112. Unlike JLGs/MCGs it is a savings linked scheme.37 1365. minimum period of six months existence for availing bank loan. The scheme provides for Opening of SB account with the bank.69 150278 120165 210441 172290 275100 224647 319990 275349 Groups formed Groups credit linked 1844.17) Scheme for Self Help Group (SHG) finance/ SHG Credit Linkage It is a very popular and widely accepted group lending scheme. 79 .37 1365.07 ( Table 20 ) Mar'07 150278 120165 Mar'08 210441 172290 (a/c in actual) Mar'09 275100 224647 Mar'10 319990 275349 350000 300000 250000 200000 150000 100000 50000 649.29 1844. maintenance of books and registers. amount lent to the members out of own sources.67 0 Mar'07 Mar'08 Mar'09 990.9% from the FY ending Mar¶07 to Mar¶10 and in also the Credit linked group has been increased as well as in terms of loan sanctioned increased by 64. group meetings. In crores)* 649.76 % in compare of financial year ending march 07 and march 2010. The limit permitted is 1:4 of the owned funds. cash in hand. Cumulative Performance Groups formed Groups Credit linked Loan sanctioned (Rs.67 990. internal lending and recovery.

The limit 80 .25000/out of the total limit permitted per borrower.72% from year ending Mar¶07 to Mar¶10. In case of groups credit linked also there has been an increase of 37.57% from year ending Mar¶09 to Mar¶10.6% from year ending Mar¶07 to Mar¶10 where as it has shown a decrease of 30.Performance during the year Performance During the Year Groups formed Groups Credit linked Mar'07 37507 36814 Mar'08 60363 52125 (table 21) Mar'09 64659 52358 Mar'10 44890 50701 70000 60363 60000 64659 52125 52358 50701 50000 40000 30000 20000 10000 0 groups formed Figure 16 44890 37507 36814 Mar'07 Mar'08 Mar'09 Mar'10 groups credit linked Analysis: The number of groups formed has been increased by 19. The scheme also covers debt redemption of the members to a maximum of Rs. Unlike SHG it is a credit linked scheme. 19) Micro Credit Groups (MCG) linkages MCG is also a group lending scheme like SHG where maximum number of members is limited to 10 and the loan is sanctioned for starting /improving and expanding any income generating activity.

ST development corporation. The State has been declared as Total Financially included on 24.  Bank is the SLBC convener of Kerala State.49 lakhs General Credit Cards since inception. Maximum repayment permitted is 60 months.  Bank has so far formed 2. Tamil Nadu.per group.and Rs. 20) Government sponsored schemes Loans can also be sanctioned under various government schemes sponsored by departments like women and child development (CDPO). Municipalities/ City Corporations. Block development offices etc 21) Other products like Kisan Credit Card.12.2007.permitted per borrower is Rs.74 Lakhs no frill Accounts during the current financial year. Kisan Suvidha.  Covered 19. SC development corporation. Swarojgar Credit Card.  Bank has so far formed 1085 farmers clubs.500000/.50000/.  Opened 1. 81 .  Till date the bank has brought 1639 villages across the country under Total Financial inclusion under one village under one Rural/Semi urban branchprogramme.04 lakhs persons under Financial inclusion  Achieved Total Financial inclusion in all Twenty six lead districts. Artisan Credit Card. 22) Total Financial Inclusion Campaigns-Multi Pronged Approach The Bank has taken up the Financial Inclusion in a multi-pronged approach under which the Bank has brought 1639 villages under Total Financial Inclusion named as Village wise campaign The Bank has piloted a project on 'Financial Inclusion Campaign' in the first phase to cover a village by each of its rural and semi urban branches cite to ensure that every family in these villages are brought into Banking services by opening Savings Bank Accounts and Cansaral (No Frill Accounts) for families hitherto outside the ambit of Banking Services. Cantools etc can also encourage financial inclusion. spread over five states.  Bank has issued 1. Minorities Development Corporation. Bihar and Uttar Pradesh. Kerala. namely Karnataka.89 lakh SHGs and credit linked 2.43 lakh SHGs since inception.

82 .08 4500 4000 3500 3000 2500 2000 1500 1000 500 0 year ending Mar'07 Figure 17 4208 2638 no of a/c 1420 765 854 1470 821 997 amt in lakh Year ending Mar'08 year ending Mar'09 Year ending Mar'10 Analysis: The amount for JLG and TFG lending has shown an increasing trend. of a/cs Amt (in crores) Mar¶08 No. of a/cs Amt (in crores) Mar¶10 No.23) Coverage under Joint Liability Group / Tenant Farmers Group (table 22) outstanding Mar¶07 No. of a/cs Amt (in crores) TFG/JLG 765 8.2 821 14. Number of accounts under this has increased by 30.54 2638 14.7%.7 997 42.32% from year ending Mar¶07 to Mar¶10 and the amount has also been increased by 392. of a/cs Amt (in crores) Mar¶09 No.

are the two questions that need to be addressed first without any bias. it is expected that the current providers of financial services to the poor will take the lead in the expansion of microfinance. and not through charity. donors.18) THE FUTURE OF MICROFINANCE Microfinance has gradually developed to be a worldwide movement. They many have separate staff and windows to serve the poor without collateral. universities. no longer being a subject matter of microfinance practitioners alone. more NGOs can incorporate microfinance as one of their programs. especially the lives of those who need it most. as a weapon against poverty and hunger. It is a financial system that serves the poor with financial services in a most effective and productive way. Postal savings banks may participate more not only in mobilizing deposits but also in providing loans to the poor and on lending funds to the MFIs. consultants. philanthropists and others are taking an increasing interest in it. researchers. microfinance has proved its value. Microfinance expansion over the next decade can be expected to be an extension of what has been achieved so far while overcoming the hurdles that have been posing difficulty in effective microfinance operation and its expansion. business communities. Given their experience and expertise. in many countries. It has been evidenced worldwide that microfinance helps the poor to overcome poverty. There may be several participants in this process and they will expand their services by existing microfinance institutions expansions of their operations to areas where there are no microfinance programs and cooperatives/credit unions may be more active in providing financial services to the poor. civil societies. foundations. International NGOs and agencies may develop or may help microfinance 83 . The concept was born in Bangladesh almost three decades ago. In places where there are no microfinance institutions. development agencies. Who will take the lead and where. corporations. banks. Governments. More commercial banks may participate both in microfinance wholesale and retailing. It really can change people¶s lives for the better. the government channels at the grassroots level may be used to serve the poor with microfinance.

it will be difficult for microfinance programs to start and expand their operation and increase their outreach. In addition to the focus on bottom poor. Unless the funding problem is taken care of. In the case of NGOs. which have more focus on poverty lending.programs in areas or countries where microfinance is not a very familiar concept in reducing poverty. It is expected that in the following years there will be considerable deepening of microfinance in this direction along with simultaneous drives to reach and serve the poorest of the poor. funding is a very critical issue for both start-up and scaling-up projects. in providing/channeling funds and creating awareness for the rapid expansion of microfinance. Development of Small-Scale Enterprises through microfinance will not only increase the outreach but will also help the generation of more employment and income for the poor. attention may also be given to the µµmissing middle¶¶. The situation may be different for regulated MFIs who can mobilize savings and use it for on lending purposes and who have access to commercial sources. the donors. Community based organizations may get involved in microfinance services. 84 . All the possible financial services can be tapped and all the actors committed to poverty alleviation whether in urban or rural areas can get involved in increasing the microfinance outreach. the networks and the media will remain as important as before in creating an enabling environment. The role of the government.

particularly in rural areas. with higher repayment rates than conventional borrowers. and finding new ways to provide banking services to the poor. Many studies show that poor people are trustable. Cost recovery is not an end in itself. Where possible. At the end it should be mentioned that Poor people with no income or means of repayment need other kinds of support before they can make good use of loans. In many cases. A financially sustainable institution can continue and expand its services over the long term. and cushion themselves against external shocks. where most of the world's poorest people live. Most poor people cannot get good financial services that meet their needs because there are not enough strong institutions that provide such services.19) CONCLUSION Microcredit and microfinance have received extensive recognition as a strategy for poverty reduction and for economic empowerment. they can earn more. such services should be coupled with building savings. When poor people have access to financial services. Microfinance is a way for fighting poverty. 85 . health. small grants. housing. employment and training programs. it is the only way to reach scale and impact beyond the limited levels that donors can fund. Achieving sustainability means lowering transaction costs. Poor households use microfinance to move from everyday survival to planning for the future: they invest in better nutrition. Accessing small amounts of credit at reasonable interest rates give poor people an opportunity to set up their own small business. and education. Strong institutions need to charge enough to cover their costs. Rather. or infrastructure improvements. offering services that are more useful to the clients. build their assets. other tools will alleviate poverty better²for instance.

and initiate start-ups.  Canara bank should expand and increase exposure of microfinance programs to outlying villages. perform cost/benefit analyses. distribution.  Canara bank should also help in marketing. or institutional sustainability. free members from unfair debt burdens. and create collective action opportunities that minimize exploitation of women and other marginalized groups. and management training to local microenterprises. empowerment.  Provide entrepreneurial skills training to conduct feasibility studies. 86 .  Consult start-up microfinance programs that struggle with operational. such as traditional handicrafts. write business plans. obstructions to economic growth. financial. promote savings. acquire financing. migration patterns. pricing.20) SUGGESTION  Canara bank should help in formation as well as maintenance of SHGs that offer financial guidance and credit.  Offer skills training groups. and capacity-building workshops to increase economic independence.  Research and analyze numerous topics that include local economic conditions. and efficacy of microfinance programs. and local employability of women and other underserved  Develop small businesses that produce saleable goods.

21) LEARNING EXPERIENCE  The project provided introduction to one of the emerging issue-Microfinance. government.  The study shows the quantitative impact of each scheme and tool. nationalized. NABARD facilitation. The study gives details about the active participation of different microfinance institutions. NGO¶s. 87 .  The study provided exposure to the benefits and impact of Microfinance and financial inclusion. with a focus on Canara Bank achievements.  It provided insight about various schemes and initiatives adopted by the RBI.SIDBI etc  It helped me to understand in detail all the schemes of Canara Bank for Financial inclusion.  The study gave details about the RBI guidelines and targets. different banks-private.  The study gives details about the demand and supply of microfinance services.  The study also provides information about the extent of financial inclusion  It has also details regarding 100% inclusion achievement.  The purpose of the study is to gain in depth knowledge about Microfinance. commercial etc. NABARD.a tool for poverty eradication.

com/English/scripts/Subsidiaries.aspx file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/CANARA%20BANK %20-%20PRIORITY%20CREDIT.htm file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/Microfinance%20%20Wikipedia.%20the%20free%20encyclopedia. Srinivasan Websites http://www.canarabank. Understanding Microfinance 2) Microfinance perspectives and operation by Macmillan publication for Indian institute of banking and finance Reports Director¶s Report of Canara Bank 2007-08 Director¶s Report of Canara Bank 2008-09 Director¶s Report of Canara Bank 2009-10 A report on Dhaka Starting Microfinance in India ± Vijay Bharti Gupta Ramola and Mathew Titus .htm file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/Reserve%20Bank%20 of%20India3.canarabank.htm 88 .canarabank.canarabank.aspx http://www.aspx http://www.aspx BIBLIOGRAPHY: Books 1) Debadutta kumar Panda .htm file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/Reserve%20Bank%20 of%20India.canarabank.aspx http://www. Basix Research paper by Prabhu Ghate Research paper by Vishal Sehgal Presentation by N.aspx http://www.

%20big%20market%20.file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/Small%20customers.htm#v=onepage&q&f=false file:///C:/Documents%20and%20Settings/User/Desktop/micro%20finance/Dead%20Presidents! %20-%20India%20Equity%20Research%20%20Canara%20Bank%20%20Annual%20Report%20-%202008-2009...htm 89 .%20-%20Google%20Books.

Organization OER-Operating Efficiency Ratio SHG-Self Help Group SFMC-SIDBI Foundation for Microcredit SGSY-Swarna Jayanti Gram Swarojgar Yojna UNDP-United Nations Development Programme 90 .International Fund for Agricultural Development JLG-Joint Liability Group MFIs.Micro Finance Institutions ME-Microenterprises MACS-Mutually aided co-operative society MCG-Micro Credit Group NBFC-Non Banking Financial Corporation NGO-Non Govt.23) ABBREVIATIONS y y y y y y y y y y y y y y IRDP-Integrated Rural Development Programme IFAD.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.