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Microfinance Industry Overview

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2 MICRO FINANCE

 Microfinance in India started in 1980 in response to the gap in

availability of formal sources of credit and lending to the
underserved and low-income population
 Most of the institutions that forayed into the sector, were from the
social sector and hence the legal entities comprised Trusts, Societies
or Section 25 Companies
 As the industry continued to grow, the non-profit form became a
limiting factor in making these institutions sustainable and scalable

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 RBI created a new subset under the Non-Banking Finance Companies

(NBFCs) for institutions specializing in microfinance and called them
NBFC-MFIs
 NBFC-MFIs have been playing a significant role in taking forward the
financial inclusion vision of the Government of India
 As on 31st Dec 2020, NBFC-MFIs provided credit to over 7.5 Cr clients
in India, with a total lending more than Rs. 39,062 Cr

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 CRITERIA FOR LOAN:

 The loan extended to a borrower whose household annual income in rural

areas does not exceed Rs. 1,25,000 while for non-rural areas it does not
exceed Rs. 2,00,000
 Total indebtedness of the borrower does not exceed Rs. 1,00,000
provided that loan, if any availed towards meeting education and medical
expenses shall be excluded while arriving at the total indebtedness of a
borrower

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 Tenure of the loan not to be less than 24 months for loan amount in excess of Rs.
30,000 with prepayment without penalty
 Loan to be extended without collateral
 Aggregate amount of loans, given for income generation, is not less than 50% of
the total loans given by the MFIs
 Loan is repayable on weekly, fortnightly or monthly instalments at the choice of
the borrower

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 Only three components are to be included in pricing of loans viz.
a) loan processing fees
b) the interest
c) the insurance premium
 There should not be any penalty for delayed payment
 No security deposit/margin is to be taken
 Capital requirement (CRAR): 15% of its aggregate risk weighted assets
 Follow RBI’s Fair Practices Code
 Must be members of all Credit Information Bureau (CIBs) and onboard data to all
Credit Bureaus as mandated by RBI

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7 MICROFINANCE INDUSTRY: CORE
STRENGTHS
 Regulated by the Reserve Bank of India with MFIN as the SRO for the industry
 Stringent Industry Code of Conduct in place
 Feet on Street delivery model which ensures doorstep delivery to clients
 Bouquet of products such as microcredit, micro insurance and micro pension
 Presence in under banked and under served places
 Financial literacy and awareness integrated to product delivery
 Conducive environment for clients with local culture, local employees and high customer
connectedness

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 8 MICROFINANCE OUTLOOK

 There are 94 NBFC-MFIs in India registered with RBI as on 30th Jan, 2021
 Non-Banking Finance Company-Microfinance Institutions (NBFC-MFIs) hold the largest share of portfolio
in micro-credit
 Microfinance industry's gross loan portfolio (GLP) stood at ₹2,32,648 crore at the end of Dec 2020, up 10
per cent year-on-year (including NBFC, banks & non profit entities)
 Total number of microfinance accounts was 9.33 crore at the end of Dec 2020, showing a growth of 21.9 per
cent

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 THANK YOU

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