A Report on Growth of Micro-finance Sector in India

Given By Prof. S. Prakash

Presented By Kaushik Dutta


The objective of this report is to analyze the growth of Microfinance sector developed in India and see the potential for the upcoming new Microfinance institutions in the market.

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Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the 'unreached poor'. Based on the philosophy of peer pressure and group savings as collateral substitute, the SHG programme has been successful in not only designing financial products meeting peculiar needs of the rural poor, but also in strengthening collective self-help capacities of the poor at the local level, leading to their empowerment

Evolution of Microfinance in India
Microfinance has been in practice for ages ( though 190 informally). 4 Legal framework for establishing the co - operative movement set up.
193 4

Reserve Bank of India Act provided for the establishment of the Agricultural Credit Department. 196
9 197 5 197 6 2

Nationalisation of banks . Regional Rural Banks created.

Grameen Bank , Mohhamad Yunus NABARD established as an apex agency for rural 198 finance .
199 5

Passing of Mutually Aided Co - op . Act in AP in 1995.

The Profile of Microfinance in India The scenario

Estimated that 350 million people live Below Poverty Line in india.  This translates to approximately 75 million households.  Annual credit demand by the poor in the country is estimated to be about Rs. 60,000 crores.  Cumulative disbursements under all microfinance programmes is only about Rs. 5000 crores.(Mar. 04)  Total outstanding of all microfinance initiatives in India estimated to be Rs. 1600 crores. (March 04)  Only about 5 % of rural poor have access to microfinance.

Government promoted microfinance programmes (Rashtriya Mahila Kosh, Velugu Project, DPIP, Swashakti)

ØLarge scale NGO initiatives (DHAN, Maryada, CARE)

ØFinancial sector initiatives – Commercial Banks (ICICI,Oriental Bank of Commerce, ABN AMRO, Canara Bank,etc.) and Development financial institutions – (HDFC,SIDBI, NABARD, etc.)

Top MFIs by Number of Active Borrowers in india
MFI* Total # of Active Borrowers (2007)** Spandana Share SKS Bandhan AML Micro credit Foundation of India (MFI) KAS Cashpor BISWA 916,261 826,517 513,108 449,304

410,329 410,329 201,692


Data have been find out by googling in different websites and searching in different magazines and journals.


About 56 % of the poor still borrow from informal sources. 70 % of the rural poor do not have a deposit account 87 % have no access to credit from formal sources. Less than 15 % of the households have any kind of insurance. Negligible numbers have access to health insurance (0.4 %) and crop insurance (0.2 %). 


Considerable gap between demand and supply for all financial services

Majority of poor are excluded from financial services. This is due to, inter-alia, the following reasons:

Bankers feel that it is fraught with risks and uncertainties. High transaction costs

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CONCLUSION S The potential for growing micro finance

institutions in India is very high. Major cross-section can have benefit if this sector will grow in its fastest pace. Annual growth rate of about 20 % during the next five year. The loan outstanding will consequently grow from the present level of about 1600 crores to about 42000 crores. Annual growth rate of about 20 % can be achieved during the next five years.

Government should give more relaxation in levying taxes to Microfinance institutions  Government as well as Microfinance institutions should promote various awareness programmes in rural areas.

BIBLIOGRAP HY  www.microfinance.com
www.microfinanceinsights.com  www.microfinanceinfo.com  www.rbi.com  www.nabard.com  www.wikipedia.com  www.google.com  MAGAZINES are  Yojna, Microfinance insights, Information for development.
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