Microfinance and

Micro-banking:
An Indian Perspective
 What is Microfinance?
 For Unemployed or Low Income Individuals or Groups
 Opportunity to become Self sufficient
 Means of Saving Money/Borrowing Money
 Small loans, high rates
 No Collateral
 Payment defaults are very low, more than 90% of the loans are
repaid

The World Bank estimates that there are more than 500 million people who
have directly or indirectly benefited from microfinance-related operations.
A Step to Empower Poor
Around 69% of the total 1.2 billion people reside in rural or semi-
urban areas of India.

About 30% (approximately 360 million) live below the poverty line.

About 60 million households in the rural area and 15 million urban

slum dwellers need microfinance.

These households use approximately INR495 billion of credit.

Why Microfinance: Scarcity of Physical, Human and Social Capital

Small Credit Big Impact- Methods

Individual
Financial
Microfinance
Institutions/Private
Institutions
Equity/ Donors
Groups
Advantages of Group Method

Trained to own joint responsibility

Ensures Repayment

In case of default- Group act as forum

Group can jointly pay for the default member

Provide creditworthiness of the individual

Common Credit Delivery Models
Self Help Groups
• Origin in India
• Formed by NGOs or
Government Agencies
• Not Exceeding 20 Members
• Social Intermediaries
• Maintains books of Account
• Autonomous and can hold
accounts
Joint Liability Groups
• Concept of Joint Liability
• Brainchild of Muhammad
Yunus, founder of Grameen
Bank in Bangladesh.
• MFI operates with center
around 40 people in one
center
• Weekly meeting in front of
MFI staff
Individual Lending Method
Based on Individual’s personal credit
worthiness

Clients who generally need bigger size

loans 

Capacity to produce guarantee 

 Top MFIs India

• Ujjivan Financial Services Pvt.

Geographical Ltd. Bandhan Financial Services
Limited, SKS Microfinance
Spread Limited

• Bandhan Financial Services

Limited, SKS Microfinance
Branch Network Limited, Spandana Sphoorty
Financial Limited
Areas of Concern
 Unjustified interest rates
 Lack of transparency in rates and other charges
 Multiple lending
 Upfront collection of security deposits
 Over borrowing
 Coercive Methods of recovery
Thank You !!