Upload
cynoray
View
218
Download
0
Embed Size (px)
Citation preview
7/28/2019 A Presentation on Micro Finance 1
1/22
A Presentation
onMicrofinance in india
7/28/2019 A Presentation on Micro Finance 1
2/22
Group Members Are:
Nitesh
Praveen
Priyanka Agarwal
Priyanka Modi
Rahul Arya
Rahul Ostwal
Rakesh Kumar Rashmi Bapna
Rashmi Dhall
7/28/2019 A Presentation on Micro Finance 1
3/22
DEFINITION
Microfinance is the provision of a broad range
of financial services to poor and low-income
people who do not have access to formal
financial services such as:
- deposits
- loans
- payment services
- money transfers
- insurance
7/28/2019 A Presentation on Micro Finance 1
4/22
HISTORY OF MICROFINANCE
MOVEMENT Microfinance has suddenly become a part of everyones
vocabulary. The credit for this, in large measure, should
go to 2006 Nobel Peace Prize Winners, Muhammad
Yunus and the Grameen Bank of Bangladesh.
The origin of the idea can be traced to the mid- 1800s.
But in 1970s the idea was put to implementation.
Organizations like Opportunity Internationaland ACCION International started extending
small loans to the poor in South America.
7/28/2019 A Presentation on Micro Finance 1
5/22
HISTORY (Contd.)
Dr. Yunus founded the Grameen Bank in 1976. Today
the Grameen Bank is the public face of a
heterogeneous movement that spans the globe.
His first micro loan of $27 was to a group of women,who used it as capital to start business.
The idea has become has so popular so that it has
found currency even in UN where it has been mooted
as a method of reviving the New Orleans economy that
was devastated by Hurricane Katrina.
7/28/2019 A Presentation on Micro Finance 1
6/22
SERVICES OF
MICROFINANACE Regulated financial institutions, such as banks, credit
unions, consumer finance companies, postal savings
banks and cooperatives
Nongovernmental organizations (NGOs) Informal sources such as money lenders,
shopkeepers, and traditional savings groups
7/28/2019 A Presentation on Micro Finance 1
7/22
Characteristics of Successful MFI
Commitment from board and management.
Knowledge of MF best practices and how to
serve micro credit clientele.
Delivery channels located as per the
convenience of the clientele.
Innovative loan, deposit, remittance andinsurance products especially adapted for low
income groups.
7/28/2019 A Presentation on Micro Finance 1
8/22
Systems and procedures adapted to themicrofinance operations.
Appropriate training and incentives for staff.
Transparent policies and procedures whichenables all the stakeholders to scan through.
Appropriate risk management techniques and
practices. Solid foundations for governance.
7/28/2019 A Presentation on Micro Finance 1
9/22
The Impact of Microfinance
When capital is scarce, marginal productivity is veryhigh. Thus, an extra Rs 1000 in capital may not make
too much of difference to the productivity of a big
corporation, but can make a significant difference to
the productivity of a poor entrepreneur. This
phenomenon explains part of why microfinance has
made an impact.
Anecdotal evidence suggests that microfinance hasindeed played a role in pulling people out of poverty.
Microfinance has also had an impact on national
economies.
7/28/2019 A Presentation on Micro Finance 1
10/22
Microfinance in India
Evolution of Microfinance in India
Microfinance has been in practice for ages ( thoughinformally).
Legal framework for establishing the co-operative movementset up in 1904.
Reserve Bank of India Act, 1934 provided for theestablishment of the Agricultural Credit Department.
Nationalisation of banks in 1969
Regional Rural Banks created in 1975. NABARD established as an apex agency for rural finance in
1982.
Passing of Mutually Aided Co-op. Act in AP in 1995.
7/28/2019 A Presentation on Micro Finance 1
11/22
The Profile of Microfinance in India
The scenario Estimated that 350 million people live Below Poverty Line
This translates to approximately 75 million households.
Annual credit demand by the poor in the country is
estimated to be about Rs. 78,000 crores. Cumulative disbursements under all microfinance
programmes is only about Rs. 8600 crores.(Mar. 07)
Total outstanding of all microfinance initiatives in Indiaestimated to be Rs. 2800 crores. (March 07)
Only about 7 % of rural poor have access to microfinance.
7/28/2019 A Presentation on Micro Finance 1
12/22
The Profile of MF in India (Contd.)
Though a cumulative of about 20 million families haveaccessed microfinance to the extent of Rs. 5000crores, the total outstanding is estimated to be onlyabout Rs. 1600 crores. The active borrowers are
estimated to have a per capita outstanding of only Rs.2500.
While 10 % lending to weaker sections is required forcommercial banks, they neither have the network for
lending and supervision on a large scale nor theconfidence to offer term loans to big MFIs.
The non poor comprise of 29 % of the outreach.
7/28/2019 A Presentation on Micro Finance 1
13/22
The Status of Microfinance in India 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
1. Bankers feel that it is fraught with risks and uncertainties.
2. High transaction costs
3. Unfavourable policies like caps on interest rates which effectivelylimits the viability of serving the poor.
While MFIs have shown that serving the poor is not an unviable
proposition there are issues that have constrained MFIs while scalingup. These include
1. Lack of an appropriate legal vehicle
2. Limited access to equity
3. Difficulty in accessing low cost on-lending funds (as of now they areunable to offer savings services in a legitimate manner.
7/28/2019 A Presentation on Micro Finance 1
14/22
The Status of MF in India (Contd.)
Limited access to Capacity Building support which is an
important variable in terms of quality of the portfolio, MIS,and the sustainability of operations.
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 %).
7/28/2019 A Presentation on Micro Finance 1
15/22
Features of Indian MF
About 60 % of the MFIs are registered as societies.
About 20 % are Trusts
About 65 % of the MFIs follow the operatingmodel of SHGs.
Large concentration in South India
600 MFI initiatives have a cumulative outreach of1.25 crore poor hoseholds
NABARDs bank linkage program has cumulativelyreached a total of 9.4 lakh SHGs with about 1.4crore households.
7/28/2019 A Presentation on Micro Finance 1
16/22
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.
7/28/2019 A Presentation on Micro Finance 1
17/22
Challenges ahead
Appropriate legal structures for the structured growth of
MF operations
Finding adequate levels of equity for the new entities to
leverage loan funds
Ability to access loan funds at reasonably low rates ofinterest.
Ability to attract and retain professional and committed
human resources. Design of apt MIS including user friendly software for
tracking accounts and operations.
Appropriate loan products for different segments.
7/28/2019 A Presentation on Micro Finance 1
18/22
Challenges (Contd.)
Ability to innovate, adapt and grow. Bring out a compendium of small and micro
enterprises for the MF clients.
Identify and prepare a panel of locally availabletrainers.
Ability to train trainers.
Capacity to provide backward linkages or createsupport structures for marketing.
7/28/2019 A Presentation on Micro Finance 1
19/22
Related Issues
Designing financially sustainable modelsAim for community participation & ownership
Increase outreach and scale up operations
Demonstrate that banking with the poor is viable Build professional systems and processes.
Ensure transparency and enhance credibility
through disclosures. Provide support for capacity building initiatives.
7/28/2019 A Presentation on Micro Finance 1
20/22
Delivery Models
Grameen model
SHG model
Joint Liability Group Non Government Organization
Rotating Savings and Credit Associations
Village Banking
7/28/2019 A Presentation on Micro Finance 1
21/22
The Entry of Investors
Private and Institutional investor
International Microcredit Fund
Microcredit Intermediary
The Village-Level Society
The Really Poor Guy
7/28/2019 A Presentation on Micro Finance 1
22/22
CONCLUSION
It is clear that over the past three decades, the
microfinance movement has emerged from obscurity to
being considered as a tool that has the potential to
significantly reduce poverty around the globe. It is an idea that has truly arrived . The manner is which
this tool is employed by policy makers and
microfinance practitioners will determine the extent and
permanence of its impact.