TONOY TARAFDARMBA(3RD SEM)ACHARYA’S BANGALORE B-SCHOOL

RISING INDIAMICROFINANCE

MICROFINANCE

Microfinance is the supply of loans, savings and other basic financial

services to the poor. As the financial services of microfinance usually involve small amounts of

money- small loans, small savings, etc- the term microfinance helps to

differentiate these services from those which formal banks provide. Microfinance has been defined by RBI as provision of thrift, credit and other financial services and product of very small amount to

the poor in a rural, semi-urban and urban areas for enabling them to

raise their income levels and improve living standard.

Micro-Credit

Programme

SELF HELP GROUPS [SHG]  

SWARNA JAYANTI GRAM SWAJROJGAR YOGNA(SGSY)

JOINT LIABILITY GROUP

•Number of members can be between 10 to 20 but for irrigation projects minimum 5 members can form SHG.•  Members are the persons below poverty line.•     Their can be only one person from one family in one SHG.•    Group need to have a bank a/c.•    There have to be regular fortnightly or monthly meetings.•    Members are to save regularly.•    Banks allow advance to SHG  with repayment within 3 to 10 yrs  savings are considered as margin and there is no requirement of collateral security. bank can also finance to the groups through NGOs NABARD refinances 100% against this loans (national bank for rural development).                          

•  This is a central government project which launched on 1.4.1999  main objective: to raise individual / groups of rural poor above poverty line within 3 yrs & at least in the 3rd yr net income would be not less than rupees 2000p.m. features of the group are almost same as SHG here members of the group will come from the BPL (below poverty line) sense’s duly approved by gram sabha 30% members may come from APL ( above povert line) purpose of loan:  economically viable & productive, farm sector & non farm sector activities identified for each block with approval of panchayat samities at block.                                  

•  5 to10 persons doing same activities & same standard may form a joint liability group this is for the persons who are engaged in tiny business self-employed persons or marginal farmers living in same area bank provide loan to this groups NABARD refinances 100% loan                                 

MFIs PERFORMANCE…

Growth 60% in outreach; 97% in loans

122 MFIs increased outreach – 53 contracted

11.5% MFIs (large) had 88% of loans 60% MFIs (small) had 1% of loans.

Small MFIs, Society and Trust forms - more prone to losses

Large MFIs targeted higher yields

High concentration in southern states – In Karnataka and AP competition is severe

Why Microfinance Can Changethe Way the World Works…

500 million poor entrepreneurs and producers, mainly women

1. 4.3.2.

Microfinance:•Lending•Savings• Insurance•Housing•Remittances

Increases:• Income•Assets•Security•Confidence in future

Better:

Health

Population

Education

Community participation

Banking for the majority

Cannot observe what client is doing

Demand vs Supply

75% population lives in rural areas:

geographical access difficult

Lack of trained staff

Illiteracy: difficult to deal with traditional

services

Defects in policy

design,

Low value of transactions

Risks of repayment

Technology

Challenges of Microfinance

ROLE OF GOVERNMENT…DO DON’T

• Promote microfinance as a key vehicle in tackling poverty, and as vital part of the financial system

• Create policies, regulations and legal structures that encourage responsive, sustainable microfinance

Have government agencies provide retail microfinance

Encourage a range of regulated and unregulated

institutions that meet performance standards

• Encourage competition, capacity building and innovation to lower costs and interest rates in microfinance

Support autonomous, wholesale structures

Place interest rate ceilings on micro loans

Clients (Mn)

2008

2009

Growth

rate %

Loans (bn)

2008 2009

Growth

rate %

SKS 1.88 3.52 87 7.81 24.6 214

Spandana 1.19 2.43 104 5.95 18.7 214

Share 1.29 1.50 16 7.28 12.2 67

Bandhan 0.76 1.45 91 2.78 5.3 91

Asmita 0.70 0.88 26 3.36 7.1 111

Top five MFIs in Outreach….

Access in terms of rural branches Increased from 1,833 in 1969 to around

32,538 at present: 49% of all scheduled commercial bank

branches are ruralTHE POPULATION

PER RURAL BRANCH DECLINED FROM

2,01,854 IN 1969 TO AROUND 16,000 AT

PRESENT.

The proportion of borrowings of rural

households from institutional sources increased from 7 per cent in 1951 to more than 60 per cent at

present.31% (131.1 MILLION)

OF THE TOTAL DEPOSIT ACCOUNTS ARE IN RURAL INDIA

43%(22.4 million) of total credit

accounts are in rural India

POSITIVE IMPACT ON THE POOR

RESULTS OFMICROFINANCE

RecommendationsBuild retail capacity in

microfinanceBuild the depth and diversity of

product offerings

Utilize technology to cut costs and expand outreach

Build permanent state policies and country strategies

Mobilize new actors, help them learn the business and play

effective roles

CONCLUSION

THANK

YOU

“a potential transform it’s weaknesses into strength”!!!