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Barathan.S Ii Year Mba

Microfinance refers to providing financial services like credit, savings, insurance, and money transfers to low-income households. The concept has existed for centuries but became more formalized starting in the 1700s and 1800s in Europe. Muhammad Yunus established the Grameen Bank in Bangladesh in 1976, revolutionizing microfinance. In India, 87% of the poor lack access to formal credit sources and depend on high-interest loans. Microfinance aims to serve the 70% of Indians living in rural villages who need financial support. Common clients are self-employed individuals or small business owners. Microfinance institutions provide small loans through group lending, offer savings and insurance products, and have simple procedures. They aim to improve borrowing patterns

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53 views

Barathan.S Ii Year Mba

Microfinance refers to providing financial services like credit, savings, insurance, and money transfers to low-income households. The concept has existed for centuries but became more formalized starting in the 1700s and 1800s in Europe. Muhammad Yunus established the Grameen Bank in Bangladesh in 1976, revolutionizing microfinance. In India, 87% of the poor lack access to formal credit sources and depend on high-interest loans. Microfinance aims to serve the 70% of Indians living in rural villages who need financial support. Common clients are self-employed individuals or small business owners. Microfinance institutions provide small loans through group lending, offer savings and insurance products, and have simple procedures. They aim to improve borrowing patterns

Uploaded by

barathan08
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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BARATHAN.

S
II YEAR MBA
Microfinance
• Microfinance refers to the provision of a broad
range of financial services to low-income
households and their microenterprises.
• It refers to a movement that envisions “a
world in which poor have permanent access to
an appropriate range of high quality financial
services
Evolution of Microfinance
• Concept of Microfinance is not new; savings
and credit groups have operated for centuries
• 1700s - writer Jonathan Swift started micro-
credit organizations in Ireland lending to rural
poor
• 1800s - more formal savings and credit
institutions known as People’s Banks and
Credit Unions began to emerge in Europe
• Muhammad Yunus, the Nobel laureate known
by many as the "father of microfinance.
• Founder of Grameen Bank in Bangladesh in
1976 which revolutionized the field of
microfinance.
What is the need for Microfinance in India

• 87 percent of India’s poor can not access credit


from formal sources.
• Depend on lenders who charge them interest
rates ranging from 48% to 120% per annum or
even higher.
• 70% of Indians living in villages needs
financial support.
Sources: World Bank in its report
Who are the clients.
• Mainly persons who don’t have stable source of
income.
• Low income persons with no access to financial
institutions.
• Especially self employed or house hold entrepreneurs.
• Even in urban areas small shop keepers and service
providers.
Features of Microfinance institutions

• Borrowers are the poor


• Small Amounts of loans
• For Production, Consumption or House
Construction and Shelter Improvement
• Group Based Lending
• A large Number of Financial Services
• Simple Procedure
• No Security
What are the Financial services provided by
MFI’s
• Providing loans
• Accepting deposits
• Life-Insurance products
Micro Insurance
• Money Transfer System
IMPACT OF MICRO-FINANCING

• Changes in Borrowing Patterns


• Increase in Savings
• Impact on income
Microfinance in India
• Microfinance providers in India
can be classified under three
broad categories:
• Formal
• Semiformal
• Informal
Formal sector
• The formal sector comprises of the banks such
as NABARD, SIDBI and other regional rural
banks (RRBs).
• They primarily provide credit for assistance in
agriculture and micro-enterprise development
and primarily target the poor.
Semi Formal sector
• The majority of institutional microfinance
providers in India are semi-formal
organizations broadly referred to as MFIs
• About 60 % of the MFIs are registered as
societies.
• About 20 % are Trusts
• About 65 % of the MFIs follow the operating
model of SHGs.
• Large concentration in South India
Informal Sector
• In addition to friends ,family, moneylenders,
landlords, and traders constitute the informal
sector.
• Even with growth of both formal and semi
formal sector, they continue to play a
significant role in the financial lives of the
poor.
Problems faced by Microfinance institutions

• Evaluating the credit worthiness of the client

• Expenses incurred are same for low amount


loans
• Expanding their network requires Human
resource which is scarce in this sector.
RBI Guidelines
• Interest rates are left to the discretion of SHG
or MFI
• Banks may choose their own intermediary
• Banks may have their own lending norms
• Banks can devise loan and saving products
• MF for consumption, production and housing
• Simple procedure and documentation
NEXT SESSION
• What is Interest rates charged by the MFI’s.
• Success stories of microfinance institutions in
India and Abroad.
CONCLUSION
• If you are uplifting the poor You are uplifting the
Nation”
Mahatma Gandhi

• Self realization and self initiative are the two most


powerful weapons to wash poverty out from the
world
Chanakya
(World’s Greatest Ancient Economic and Political
Scholar)
A Tribute
THANK YOU

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