A Presentation on Microfinance

Prepared by :-

Akshay Sikarwar

Srishti Gaur

GLA University, Mathura

CONCEPT OF MICRO - FINANCE

Microfinance is defined as

“Financial Services (savings, insurance, fund, credit etc.)

provided to poor and low income clients so as to help them raise

their income, thereby improving their standard of living”

Mohammed Yunus was awarded the Noble Prize for application of

the concept of microfinance, with setting up of the Grameen Bank

in Bangladesh.

FEATURES OF MICROFINANCE

1) It is an essential part of rural finance.

2) It deals in small loans.

3) It basically caters to the poor households.

4) It is one of the most effective and warranted Poverty

Alleviation Strategies.

5) It supports women participation in economic activities.

6) It provides an incentive to grab the self employment

opportunities.

7) It is more service-oriented and less profit oriented.

8) It is meant to assist small entrepreneur and

producers.

9) Poor borrowers are rarely defaulters in repayment of

loans as they are simple and God-fearing.

10) India needs to establish several Microfinance

Institutions.

MICROFINANCE

MODELS IN INDIA

Microfinance services are provided mainly by two

models:-

1. Self Help Group - Bank Linkage Program (SBLP)

Model

2. Micro-Finance Institutions Model (MFI).

These both together have about 7 crore clients.

What is SHG Bank Linkage

Programme?

SHG-Bank Linkage Programme was

introduced by NABARD in 1992. Under the SBLP,

the following three different models have emerged:

1. Model I: SHGs promoted, guided and financed by banks.

2. Model II: SHGs promoted by NGOs/ Government agencies

and financed by banks.

3. Model III: SHGs promoted by NGOs and financed by banks

using NGOs/formal agencies as financial intermediaries.

2. Micro Finance Institutions (MFls)

MFls include NGOs, trusts, social and economic

entrepreneurs, these lend small sized loans to individuals

or SHGs.

MFIs operate under following models:-

a) Bank Partnership Model

i. MFI As Agent :-

ii. MFI as Holder of Loans:-

b) Banking Facilitators

Microfinance Institutions in India

Top Microfinance Institutions:-

SKS Microfinance Ltd.

Bandhan Financial Services Pvt. Ltd.

Janlakshmi Financial Services Ltd.

Fusion Microfinance Pvt Ltd.

Ujjivan Financial Services Ltd.

Janalakshmi Financial Services

Chairman : Ramesh Ramanathan

Founded - 2006

Two tier structure

1. For-profit operating companies for investors

2. Not-for-profit holding company called

Janalakshmi Social Services

Our Investors

Bellwether Microfinance Fund:

Tree Line Investment Management Limited:

Citi Venture Capital International:

India Financial Inclusion Fund (IFIF)

Gawa Microfinance Fund

Morgan Stanley Private Equity Asia

QRG Enterprises

Tata Capital Growth Fund

SERVICES

Savings

Small loans

Transfers

Insurance

Partnered Products

Bajaj Allianz Life Insurance Co. Ltd.

1) Group Term Life Insurance Plan

2) Group Credit Protection Plan

3) Sarve Shakti Suraksha

1. National Pension Scheme - Lite (NPS – Lite)

i. National Pension Scheme

2. DCB Bank - Janajeevan Card

i. Prepaid Cards

3. Goal Based Savings

i. Savings Plan

4. HDFC life Scheme

i. Group Term Life Insurance

Facts about Microfinance in India

The gross loan portfolio of India's microfinance sector accounts for more than 7 percent of the sector's worldwide loan portfolio size.

As much as 30 per cent of the world's microfinance borrowers are in India.

India is the largest microfinance market in the world, with some 120 million homes with no access to financial services.

The microfinance market has grown at an average annual rate of nearly 80 percent over the last three years.

There are more than 3,000 MFIs and NGO-MFIs, of which about 400 have active lending programmes, according to CRISIL Research.

The top 10 MFIs account for nearly three-fourths of loans outstanding.