MFIs & Financial Inclusion

8/14/2019 MFIs & Financial Inclusion

1/13

&MFIs Financial Inclusion&MFIs Financial Inclusion

:Group 6:Group 6


2/13

SummarySummary


3/13

Micro Finance InstitutionsMicro Finance Institutions


4/13

Financial InclusionFinancial Inclusionthe process of ensuring access to financial services and timely andthe process of ensuring access to financial services and timely and

adequate credit where needed by vulnerable groups such asadequate credit where needed by vulnerable groups such as

weaker sections and low income groups at an affordable costweaker sections and low income groups at an affordable cost

These services are:These services are:

(i) a no-frills banking account for making and receiving(i) a no-frills banking account for making and receiving

payments,payments,

(ii) a savings product suited to the pattern of cash flows of(ii) a savings product suited to the pattern of cash flows of

a poor household,a poor household,

(iii) money transfer facilities,(iii) money transfer facilities,

(iv) small loans and overdrafts for productive, personal(iv) small loans and overdrafts for productive, personal

and other purposes,and other purposes,

(v) micro-insurance (life and non-life)(v) micro-insurance (life and non-life)


5/13

C Rangarajan Committee on FinancialC Rangarajan Committee on FinancialInclusionInclusion

There is a need to recognize a separate category of MicrofinanceThere is a need to recognize a separate category of Microfinance

Non Banking Finance Companies (MFNBFCs) Non Banking Finance Companies (MFNBFCs)

Opening of specialised microfinance branches / cells in potentialOpening of specialised microfinance branches / cells in potential

urban centers for exclusively catering to microfinance andurban centers for exclusively catering to microfinance and

SHG - bank linkages requirements of the urban poor.SHG - bank linkages requirements of the urban poor.

An enabling provision be made in the NABARD Act, 1981An enabling provision be made in the NABARD Act, 1981

permitting NABARD to provide micro finance services to thepermitting NABARD to provide micro finance services to the

urban poor .urban poor .


6/13

Functioning of Micro FinancialFunctioning of Micro Financial

InstitutionsInstitutions


7/13

Regulatory framework of Micro FinancialRegulatory framework of Micro FinancialInstitutionsInstitutions

Current estimates of the number of NGOsCurrent estimates of the number of NGOs

engaged in providing microfinance servicesengaged in providing microfinance services

to the poor exceed 1,000 organisationsto the poor exceed 1,000 organisations

More than 1000 MFIs are there in India today,More than 1000 MFIs are there in India today,

among which 400-500 continue to operate inamong which 400-500 continue to operate inthe form of registered societies or trusts,300-the form of registered societies or trusts,300-

400 MFIs operate as cooperatives400 MFIs operate as cooperatives


8/13

Role of MFI s in MSME s Role of MFI s in MSME s

MFIs offer micro credit toMFIs offer micro credit to

borrowersborrowers

MFIs lend to MSMEsMFIs lend to MSMEs

7% contribution by MFIs7% contribution by MFIs


9/13

CURRENT SCENARIOCURRENT SCENARIO

3 Million MSME( 50% of Industrial3 Million MSME( 50% of Industrial

Output & 42% of Total Exports)Output & 42% of Total Exports)

1000 MFI1000 MFI

Micro lenders increased to 60% inMicro lenders increased to 60% in

2008-20092008-2009

SMERA MFI RatingSMERA MFI Rating


10/13

Problems faced by MFIsProblems faced by MFIs

Lack of fundsLack of funds

Financial exclusionFinancial exclusion

Unable to meet the needs ofUnable to meet the needs of

clientsclients

Interest ratesInterest rates

Service taxesService taxes

Not able to access tax refundsNot able to access tax refunds

Lack of trained labor andLack of trained labor and

mobilization of resourcesmobilization of resources


11/13

SuggestionsSuggestionsBuilding sustainable MFIs in India:Building sustainable MFIs in India:

NBFC status Allows MFIs to be regulated by RBINBFC status Allows MFIs to be regulated by RBI Bigger is betterBigger is better

FlexibilityFlexibility

Tax concessionsTax concessions

Use of MISUse of MIS

Permitting MFIs to take deposits from members/borrowersPermitting MFIs to take deposits from members/borrowers

Simplify foreign investment regulations to enable MFIs toSimplify foreign investment regulations to enable MFIs to

raise foreign equityraise foreign equity

Emerging trends in MFIs in relation to HRM:Emerging trends in MFIs in relation to HRM:

Separation of HRM as a key functionSeparation of HRM as a key function

Recruiting professionalsRecruiting professionals

Focus on induction and orientationFocus on induction and orientation

Training and grooming field staffTraining and grooming field staff

Incentive-based salariesIncentive-based salaries


12/13

Suggestions ContdSuggestions Contd

Financial sustainability can beFinancial sustainability can beachieved through:achieved through:

Controlling CostsControlling Costs

- Reducing Average Cost of- Reducing Average Cost of

FundsFunds

- Reducing Cost of Operations- Reducing Cost of Operations

- Reducing Cost of Bad Debts- Reducing Cost of Bad Debts Increasing VolumesIncreasing Volumes

Increasing Services Savings andIncreasing Services Savings and

InsuranceInsurance


13/13

Documents

MFIs & Financial Inclusion