Microfinance industry turn around

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Post on 08-Jun-2015

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  • 1. Microfinance Group Alpha

2. AgendaIntroduction-Microfinance IssuesPESTEL analysis Financial analysis Recommendations 3. Introduction MicrofinanceLoans outstanding : Unbanked population:30 million borrowers $2.5 billion 450 millionMicrofinance InstitutionsCo-operative NBFC NGO-MFIMFIs SanghamitraSEWA bankSKSBandhan Samiti Spandana 4. Issues facing the industry Multiple LendingImproper Usage of LoansLack of Customer OrientationAccess to Capital Lack of Proper TechnologyDEFAULTTransparency in PricingLack of Product CustomizationLack of Corporate GovernanceSensitivity to Interest rates Over Regulation and UnderRegulation 5. PESTEL analysis Political Reserve Bank of India ActEconomicLack of Technology Banking Regulation ActSHG modelProfile of BorrowersSoftwareCompanies ActNeed to support environmentally Social2004-2005 Krishna DistrictPlight of Borrowerssustainable projects Concentration AccessCo-operative Societies Act AP government interventionFarming of FundingSources Techniques MNREGSInvestment AP Act TechnologicalPolicy Paralysis No MIS Microfinance Bill RBI RegulationsEnvironmental Legal 6. Andhra Pradesh crisis AP ACT 2010 HighInterestHighMultiple Coercion Rates Suicides Lending 2.5 million houses 27 million transactionsCompetition? Over Regulation?Back toMoneylenders 7. Analysis of costs of MFIsComponents of APR5% Annualized percentage rate is the 6%compounded annual costs of the loans The hidden costs which is around 22% should 11% be clearly communicated to the customersInterest The operating expenses reduces as the scale ofFees operations increasesInsurance The interest rate cap of 26% will negativelySecurity affect the profits of small and medium sized78%MFIs MFIs have higher percentage of overheads compared to larger firms. These higher costs eat into the margins of smaller MFIs Comparison of costs120% SKS vs JanalakshmiProvision and write-offs100%22%7%Depreciation80%and ammort15% 33%60%Operating and30%other40% 35% expenses20%Personnel32%expenses21% 0%SKSJanalakshmi 8. Increase in scale ofoperations reduces the39%operating costs Comparison of costs37%35%33%ScaleClient Outreach31% Tier I >250,00029%27%Tier II50,000-250,00025%23%Tier III