what is microfinace ppt imp.pptx

8/11/2019 What is microfinace ppt imp.pptx

1/26


2/26

What is microfinace?

A type of banking service that is provided tothe unemployed or low-income individuals orgroups who would have otherwise no other

means of gaining financial services Microfinance recognizes that poor people are

remarkable reservoirs of energy andknowledge. It creates an opportunity tocreate markets, bring people in from themargins and give them tool to helpthemselves. KOFI ANNAN (Sec. Gen. of UN)


3/26

HOW MICROFINANCE STARTED?

Grameen bank of Bangladesh with the

microfinance pioneer Mohammad

Younus kept the base and startedshaping the modern industry of

Mirofinance.On the field, he saw thatEven Poor people need loans.

They can have an activity and repay

He set up financials institutions with social missionListen to the needs and constraints of the needy and offer

them adapted tools to empower themselves.


4/26

Micro finance (case study)


5/26


6/26

MICRO FINANCE (CASE STUDY)

Mrs. Bharti needs Rs. 1000

1. Visit of Mrs. Bharti tothe MFI meeting ,loanofficer convinced and grants

loan of Rs. 1000. (+30Interest rate)

2. Purchase ofSewing Machine.Starts sewing andselling Clothes.

(Daily profit = Rs. 100)

3. Weekly repayment(Rs.86).Remaining amount isused to buyaccessories

4. Final repayment after12 weeks. Demand for2ndloan over Rs. 1500 to

expand her business.


7/26

NEED OF MICROFIN NCE IN INDI

India is said to be the home of one third of the worlds poor

About 87 % of the poorest households do not have access to

credit.

The demand for microcredit has been estimated at up to $30billion; the supply is less than $2.2 billion combined by all

involved in sector.

Microfinance has been present in India in one form or another

since the 1970s and is now widely accepted poverty alleviation

strategy .

Commercial banks played an important part in development

of microfinance industry. Despite this growth, the poverty

situation in India continues to be challenging.


8/26

Need of microfinance in india (CONTD.)

The indian microfinance sector has been rated as one ofthe fastest growing sectors in the world.

There are 1000 mfis operating in india as on march 2009

Mfis have reached 234 of the 331 poorest districtsidentified by the government.

At present lending of the economically active poor bothrural and urban is pegged at around 7000 crores in the

Indian banks credit outstanding. As against this, according to even most conservatives

estimates, the total demand for credit requirements forthis part of the indian society is somewhere around Rs.

2,00,000 Crores.


9/26

Need of microfinance in india (contd)

More than 350mn people in India live belowpoverty line

MFIs cater to over 55mn people in India, with90% of them being women.


10/26

Advantages of Microfinance

Self Employment

Microfinance Increases household income

Increase food security

The building of assets

Increase likelihood of educating ones

children It reduces their vulnerability to external

shocks like illness, weather and more.


11/26

Who requires microfinance

In India , generally Microfinance is sought by

Small and marginal farmers

Rural artisans; and

Economically weaker sections

Women constitutes a vast majority of users of

Microcredit and Micro saving Facilities.


12/26

Rural Poor

Dependent on agriculture as primary sourceof Income

Majority are of them are small or marginalfarmers

Poorest households are landless

Uncertain and irregular income streams


13/26

Urban Poor

KYC norms of Banks and NBFC require proofof residence (unable to provide).

Requires facilities like housing finance, healthinsurance, remmitances, saving andinvestments


14/26

PRESENT SCEN RIO of INDI

India falls under low income class accordingto world bank.

It is second populated country in the worldand around 70% of its population live in ruralarea.

60% of people depend on agriculture, as a

result there is chronic underemployment andper capita income is only Rs. 5729

Result is abject poverty, low rate of

education,exploitation,etc


15/26

Present scenario of india

Low asset base According to RBI, about 51% of thepeople house possess only 10% of total assets of India.

Resulted in low production capacity of both agriculture (

which contributes around 22-25 % of GDP) andmanufacturing sector.

Rural people have very low access to institutional credit(from commercial bank).


16/26

CHALLENGES FACED BY MFIS


17/26

Heavy dependence on Banks and FIs

MFIs are dependent on borrowings fromBanks and Fis

For more MFIs ,the funding source arerestricted to private banks and apex MFIs

Available bank funds are generally shortterms ( 2 years)


18/26

Political sensitivity and Interest

rates

Interest rates charged by the MFIs are primarily to thepoor people, thereby it can become a politically sensitiveissue.

Over the past few years, MFIs in southern India stateswere accused of excessively charging high interest ratesand have been targeted by local administration


19/26

Operational Issues

MFIs risk management practices haveweakened over the past few years in search ofgrowth and expansion.

Credit sanctioning and monitoring practiceshave weakened.

Also High debt ratios are the cause of

concern.


20/26


21/26

Challenges ahead

Appropriate legal structure for the structuredgrowth of MF operations

Ability to access loan funds at reasonably low

rate of interest. Ability to attract and retain professional and

committed human resources. Design of apt MIS including user friendly

software for tracking accounts andoperations. Appropriate loan products for different

segments.


22/26

Challenges ahead (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

available trainers.

Ability to train trainers.

Capacity to provide backward linkages orcreate support structures for marketing


23/26

FUTURE OF MICROFINANCE


24/26

Future of Microfinance

Estimated that in the next 5 years, 65 % ofthe poor people will have access to MFIs

Many private banks and foreign banks wouldenter the segment because of very low NPAs

Estimated that 5% of the number of peoplebelow poverty line will get reduced in the

next 5 years. (World bank report)


25/26

Conclusion

In Bangladesh, microfinance has successfullyenabled impoverished people to engage in selfemployment project that allow them to generate

an income and, in many cases, begin to buildwealth and exit poverty.

In India MF has succeeded with repayment ratesupto 98% reported all across the country.

This tells us that microfinance certainly hasthe capacity to reduce poverty by greatmargin


26/26

what is microfinace ppt imp.pptx

Documents