MICRO FINANCE

REVOLUTION IN INDIA
Presented By:
Nishant Bindra
P. Suraj
Vikas Kumar
Saurabh Mishra
Saurabh Agrawal
Himanshu Shekhar
 WHAT IS MICRO
FINANCE ??
• Microfinance is the provision of financial
services to low-income clients or solidarity
lending groups including consumers and the self-
employed, who traditionally lack access to banking and
related services.

• A world in which as many poor and near-poor households

as possible have permanent access to an appropriate range
of high quality financial services, including not just credit
but also savings, insurance, and fund transfers.
MICRO FINANCE IN
INDIA
 Microfinance has been in practice for ages ( though
informally).
 Legal framework for establishing the co-operative movement
set up in 1904.
 Reserve Bank of India Act, 1934 provided for the
establishment of the Agricultural Credit Department.
 Nationalization of banks in 1969
 Regional Rural Banks created in 1975.
 NABARD established as an apex agency for rural finance in
1982.
OBJECTIVES :
 Low-income households, permanent access high quality
financial services

 To finance their income-producing activities, build assets

 Stabilize consumption

 Protect against risks

 Not limited to credit, but include savings, insurance, and

money transfers.
Microfinance clients…
 Poor & low-income people

 Usually self-employed

 Micro-entrepreneurs

 Near the poverty line, both above and below

 Women : majority of clients.

Examples of Institutions delivering
microfinance in India?
 SKS Microfinance Ltd (SKSMPL)

  Spandana Sphoorty Financial Ltd (SSFL)

  Asmitha Microfin Ltd (AML)

  Shri Kshetra Dharmasthala Rural Development

Project(SKDRDP)

  Bhartiya Samruddhi Finance Limited (BSFL).

Legal forms of MFIs in India
NON PROFIT ORGANIZATIONS.

MUTUAL BENEFITS ORGANIZATIONS.

FOR PROFIT MFIs.

ISSUES AND CHALLENGES :
 Literacy & Skill Levels of Clientele

 High Transaction and Service Cost

 Credit Risk

 Skewed Regional Distribution of Microfinance

 Diversion of Funds to Unproductive Activities

CONTD….
 Regulatory Issues.

 Irregular Flow of Income due to Seasonality.

 Uncertainty of Market Conditions.

 Lack of Tangible Proof for Assessment of Income.

 Need for Information Sharing & Better Technology.

Facts about MFIs in India
30 percent of the world's microfinance
borrowers are in India.
Largest microfinance market in the
world.
Mostly in Southern part of India.
Grown at an avg. rate of 80% over the
last 3 years.
 The interest rate declared by the MFIs is different from
the actual and indirect rate that includes hidden charges.
 Cases of violation and harassment by MFIs in Andhra
Pradesh.
 Andhra government has introduced an ordinance for
MFIs.
• Limit the interest rate that could be charged by MFIs.
• MFIs  cannot extend a second loan unless the first loan
has been fully paid off.
• MFIs will now be required to submit a monthly statement
to Registering Authority.
Shortcomings :
 Human resource capacity

 Cost efficiency

 Cost borrowing

 Lack of regulations

 Reaching remote areas

Projections for the future
Annual growth rate of about 20 % during the
next five years.
75 % of the total poor households of 80 million
(i.e. about 60 million will be reached in the next
five years.
The loan outstanding will consequently grow
from the present level of about 1600 crores to
about 42000 crores.
Thank you 