CONTENTS

CHAPTER NO PARTICULARS PAGE NOCHAPTER -I (Introduction)

Introduction to the concept

2-3

Scope of the study4

Statement of the problem --

Objective of the study 5

Research methodology 6

CHAPTER -II (Profile of the Company)

Profile

industry profile 7

company profile

8-15

CHAPTER -III Literature Survey

Conceptual and theoretical review 16-23

CHAPTER -IV Data analysis, interpretation

Analysis Part – I &Analysis Part – II 25-36

CHAPTER V Conclusions

Summary of findings 37

Recommendation 38

Bibliography 39

Annexure 40-

INTRODUCTION

Microfinance is defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals which fall just above the nationally defined poverty line, and poor individuals which fall below that poverty line, with the goal of creating social value. The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital for micro enterprise, and insurance and savings for risk mitigation and consumption smoothing. A large variety of actors provide microfinance in India, using a range of microfinance delivery methods. Since the ICICI Bank in India, various actors have endeavored to provide access to financial services to the poor in creative ways. Governments also have piloted national programs, NGOs have undertaken the activity of raising donor funds for on-lending, and some banks have partnered with public organizations or made small inroads themselves in providing such services. This has resulted in a rather broad definition of microfinance as any activity that targets poor and low-income individuals for the provision of financial services. The range of activities undertaken in microfinance include group lending, individual lending, the provision of savings and insurance, capacity building, and agricultural business development services. Whatever the form of activity however, the overarching goal that unifies all actors in the provision of microfinance is the creation of social value.

MICROFINANCE DEFINATION

According to International Labor Organization (ILO), “Microfinance is an economic development approach that involves providing financial services through institutions to low income clients”.In India, Microfinance has been defined by “The National Microfinance Taskforce, 1999” as “provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards”.

"The poor stay poor, not because they are lazy but because they have no access to capital."

The dictionary meaning of ‘finance’ is management of money. The management of money denotes acquiring & using money Micro Finance is buzzing word, used when financing for micro entrepreneurs Concept of micro finance is emerged in need of meeting special goal to empower under-privileged class of society, women, and poor, downtrodden by natural reasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are founded on the philosophy of cooperation and its central values of equality, equity and mutual self-help. At the heart of these principles are the concept of human development and the

brotherhood of man expressed through people working together to achieve a better life for themselves and their children. Traditionally micro finance was focused on providing a very standardized credit product. The poor, just like anyone else, (in fact need like thirst) need a diverse range of financial instruments to be able to build assets, stabilize consumption and protect themselves against risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to find efficient and reliable ways of providing a richer menu of micro finance products. Microfinance is not merely extending credit, but extending credit to those who require most for their and family’s survival. It cannot be measured in term of quantity, but due weight age to quality measurement. How credit availed is used to survive and grow with limited means

Microfinance in simple words can be defined as a type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.

MICROFINANCE

Traditionally banks and Lending Institutions do not lend money to low income Individuals. The reasons being • Lack of Information about Individuals.

• Collateral.

• High Transaction cost of processing

Microfinance provides a solution for the above problem.

GOALS OF MICROFINANCE • Eradicate Extreme Poverty & Hunger

• Achieve Universal Education.

• Promote Gender Equality & Women’s Empowerment.

• Reduce Child Mortality

• Combat Diseases

• Developing Entrepreneurial Spirit

SCOPE OF STUDY

It will serve as a guide to others who are willing to get in-depth knowledge on microfinance.

This project is limited to SKS Microfinance Ltd (SKSMPL) & Bandhan financial services private ltd.

Project work focused on only microfinance in India.

A study of microfinance is helpful to the both microfinance companies to understand their growth in microfinance world.

STATEMENT OF PROBLEM

Determining the attributes, which influence & drive low income group’s loan preference towards a microfinance loan. These attributes include interest rate, loan amount, and microfinance loan lending process

OBJECTIVE OF THE STUDY

To study the concept of microfinance in India.

To study the various aspects of microfinance & their financial services.

To analysis the profitability margin of the firm& growth in microfinance world.

To understand role & implication of microfinance in inclusive growth of economy.

LIMITATION OF THE STUDY

Limitations of the study can be summarized as below

Geographical Constraint:- This Study is only for microfinance in India.

Accuracy Constraint:-As the data is collected is on secondary basis it have a higher possibility of varying in accuracy.

RESEARCH METHODOLOGY

Research Methodology is a systematic method of discovering new facts or

verifying old facts, their sequence, inter-relationship, casual explanation

and the natural laws which governs them.

Research Methodology explained by Redman and Mory are as follows

“systematized effort to gain new knowledge”

In Research Methodology mainly Data plays an important role.

The Data is divided in two parts:

a) Primary Data.

b) Secondary Data.

SOURCES OF DATA:

The task of data collected after a research problem has been defined and

research design. While deciding about the method of data collection to be

used for the study, the researcher should keep in mind two types of data

viz, primary and secondary. The primary data are those which are

collected freshly and for the first time, and thus happen to be original in

character. The secondary data, on the other hand, are those, which have

already, been passed through the statistical process. The sources of data

for this research are both from primary and secondary.

Secondary Data

Secondary data include appropriate materials from magazines, internet,

and company brochure and by means of discussion with the guide, Annual

Report.

INDUSTRY PROFILE

A microfinance institution (MFI) is an organization that provides financial services to the poor. This very broad definition includes a wide range of providers that vary in their legal structure, mission, and methodology. However, all share the common characteristic of providing financial services to clients who are poorer and more vulnerable than traditional bank clients.

During the 1970s and 1980s, the microenterprise movement led to the emergence of nongovernmental organizations (NGOs) that provided small loans for the poor. In the 1990s, a number of these institutions transformed themselves into formal financial institutions in order to access and on-lend client savings, thus enhancing their outreach. Specialized microfinance institutions have proven that the poor are “bankable”. Today, formal institutions are rapidly absorbing the lessons learned about how to do small-transaction banking. Many of the newer players in microfinance, such as commercial banks, have large existing branch networks, vast distribution outlets like automatic teller machines, and the ability to make significant investments in technology that could bring financial services closer to poor clients. Increasingly, links among different types of service providers are emerging to offer considerable scope for extending access.

A microfinance institution (MFI) is an organization that provides microfinance services – loans, savings, maybe even insurance – to the world’s poor. An MFI can operate as a nonprofit such as a non government organization (NGO), credit cooperative, non bank financial institution (NBFI), or even a formal, regulated for profit bank.MFIs differ in size and reach; some serve a few thousand clients in their immediate geographical area, while others serve hundreds of thousands, even millions, in a large geographical region, through numerous branches. Many MFIs offer services beyond loans and savings, including education on business and financial issues and social services focused on health and children.

Microfinance companies are the financial institutions that offer small-scale financial services in both the forms – credit and savings, especially to the poor in rural, semi-urban and urban areas. These financial services are meant to help them in undertaking economic activities, mitigating vulnerabilities to income shocks, smoothening consumption, increasing savings and supporting self-empowerment. There are a number of microfinance companies in India, which play some pivotal roles to the development of India. India’s microfinance sector is fragmented with more than 3000 microfinance companies (MGIs), NGOs and NGO-MFIs. The top 10 microfinance companies in India are estimated to account for almost 74 per cent of the total loans outstanding. It can be added here that the

total loan outstanding of Indian microfinance sector lies between ` 160-175 billion. As on March 31, 2009, almost 17 Indian microfinance companies have more 1 million outstanding loans.

COMPANY PROFILE

COMPANY NAME: - SWAYAM KRISHI SANGAM

DATE OF ESTABLISHED: - Jan 1 1997 CURRENT LEGAL STATUS: NBFI

PRODUCTS & SERVICES: - LOAN

PRODUCTS: - Income generating loans Mid Term Loans Loan Cover Insurance TOTAL BRANCHES &OFFICES: - 2029

TOTAL PERSSONEL:- 21,154

HEAD OFFICE ADDRESS: -

1-10-60 to 62, Ashok Raghupati Chambers, Opp. Shopper Stop, BegumpetSecunderabad,Andhra Pradesh500 016

MISSION STATEMENT

“Our purpose is to eradicate poverty. We do that by providing financial services to the poor and by using our channel to provide goods and services that the poor need”.

LOGO:-

HISTORY OF SKS MICROFINANCE PRIVATE LTD

SKS stands for Swayam Krishi Sangam, which in Hindi means “self-cultivation society.” Dr. Vikram Akula, Founder and Chairperson, founded SKS in 1997 and launched operations in 1998 in Andhra Pradesh, India with the mission to eradicate poverty. In 1996-97, while still a PhD graduate student, Akula raised $52,000 in seed funding from 357 family members and friends to start SKS as a non-profit organization. In 2005, SKS converted into a non-banking financial company (NBFC) which is regulated by India’s central bank, the Reserve Bank of India (RBI).

The Company was incorporated as ‘SKS Microfinance Private Limited’, on September 22, 2003 under the Companies Act, 1956. The Registered Office of the Company is situated at Ashoka Raghupathi Chambers, D No. 1-10-60 to 62, Opposite to Shoppers Stop, Begumpet, Hyderabad 500 016, Andhra Pradesh. The Company had obtained a certificate of registration from the RBI on January 20, 2005 to commence the business of a non-banking financial institution without accepting public deposits. With effect from September 1, 2005, the Company acquired business operations, assets and loan portfolio from SKS Society that was structured as a NGO and was engaged in microfinance.

The name of the Company was changed from ‘SKS Microfinance Private Limited’ to ‘SKS Microfinance Limited’ pursuant to a resolution of our shareholders passed at an EGM held on May 2, 2009 and fresh certificate of incorporation bearing CIN number U65999AP2003PLC041732 was issued on May 20, 2009. Subsequently, a fresh certificate of registration dated June 3, 2009 was obtained from RBI for carrying on the business of non-banking financial institution without accepting public deposits. The Company is the largest MFI in India in terms of total value of loans outstanding, number of borrowers and number of branches, according to the October 2009 CRISIL report titled India Top 50 Microfinance Institutions, or the CRISIL Report. The Company is engaged in providing

microfinance services to women in the lower income segment predominantly located in rural areas in India. Sks microfinance company Converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. 

PRODUCT PROFIL OF SKS LTD

PROPRIETARY PRODUCTSProduct Features BenefitsIncome Generation Loans (IGL) - Aarambh

Loans range from Rs. 4,000 to Rs. 10,000 for the first loan; subsequent loan amounts determined by past credit history and increased each in set increments up to a maximum of Rs. 26,000Term of the loan is 50 weeks with principal and interest payments due on a weekly basis

12.5% flat interest rate / 24.55% annual effective interest rate

Provides self-employed women financial assistance to support their business enterprises, such as raising livestock, running local retail shops called kirana stores, providing tailoring and other assorted trades and services

Mid-Term Loan (MTL) - Vriddhi

Loan amounts range from Rs. 2,000 to Rs. 14,000 in each annual cycle.Available any time after the completion of 20 weeks & before 40 weeks of an IGLcycleTerm of the loan is 50 weeks with principal and interest payments due on a weekly basis12.5% flat interest rate / 24.55% annual effective interest rate

Provides self-employed women financial assistance to support their business enterprises, such as raising livestock, running local retail shops called kirana stores, providing tailoring and other assorted trades and services

Emergency Loans and Advances -

Interest free emergency loans range from Rs. 500 to Rs. 2,000

Designed to meet the unforeseen emergency requirements of members

Raksha Term of the loan is 20 weeks with a bullet repayment Interest free funeral advances of Rs. 1,000 adjusted out of the claim settlement of loan cover insurance

Disbursed within 24 hours of request

Funeral advance paid to a member’s family upon the death of the member or her spouse

Life Insurance Loans

Interest free loans of Rs. 500Term of 25 weeks with principal repaid weekly

Issued to members to pay their life insurance premiums during the initial 25 week periodHelps to promote habit of savings and reduction of vulnerability among members

Mobile Loans

Financing of mobile phones and telephone servicesLoan amounts range from Rs. 1,500 to Rs.3,00026.14% annual effective interest rate and loan processing fee of 1%Term of 25 weeks

Provides financing for mobile phones and telephone services to our members

Sangam Store Loans

Working capital loans ranging from Rs. 1,000 to Rs. 12,500Interest freeTerm of the loan is 14 days

Provides a working capital loan to fund the needs of our members who own and operate kirana storesThe program allows these members to purchase their inventory of consumer goods and groceries from a national wholesaler at wholesale prices

Housing Loans

Loans range from Rs. 50,000 to Rs. 150,000Members must have completed at least 3 IGL cycles to qualify or one ILP to be completedTerm of loan is 3 to 5 years with principal and interest payments due on amonthlybasis11.9% flat interest rate, 21% annual

Provides financial access to women for construction of new houses or improvement & extension of existing houses

effective interest rateIn addition, loan processing fee of 2%

DISTRIBUTORS PRODUCTS

Product Features BenefitsLife Insurance

Weekly payment of Rs. 20 for the term of five years

Upon death, we disburse to the beneficiary the full sum assured of Rs. 5,000 plus the account value, which is equal to the aggregate of the premiums paid plus interest accrued, if any, less any charges for the administration of the policy

In the event the death is deemed an accidental death, the beneficiary receives Rs. 10,000 plus the account value

Upon maturity in five years where no death has occurred, we disburse to the policyholder the account value

BOARD OF DIRECTORS

Director Name

Vikram Akula

M R Rao

V Chandrasekaran

Pramod Bhasin

P H Ravi Kumar

Tarun Khanna

Designation

Executive Chairman

Managing Director & Chief Executive Officer

Independent Director

Independent Director

Independent Director

Independent Director

Geoffrey Tanner Woolley

Sumir Chadha

Paresh D Patel

Independent Director

Director

Director

COMPANY PROFILE

COMPANY NAME: BANDHAN FINANCIAL SERVICES PRIVATE LTD

DATE OF ESTABLISHED: - 1995

Current Legal Status: NBFI

PRODUCTS & SERVICES: - LOAN

PRODUCTS: - Loan Pension services Remittance services

TOTAL BRANCHES &OFFICES: - 1050

6620TOTAL PERSSONEL:- HEAD OFFICE ADDRESS: - EC - 76 Sector 1 Salt Lake City, Kolkata 700 064, India

MISSION STATEMENT

“To reduce, economic & poverty significantly by creating employment through providing cost effective, sustainable financial & other development services”.

LOGO:-

HISTORY OF BANDHAN MICROFINANCE LTDHISTORY OF BANDHAN FINANCIAL SERVICES PRIVATE LTD

Bandhan Financial Services Pvt. Ltd. operates as a microfinance institution in India. It offers micro, micro enterprise, micro small and medium enterprise, and micro health loans. The company provides loans for women and families; and agriculture, zari work, embroidery, animal husbandry, crafts work, small trading, vegetable vending, fishing, poultry, rice husking, horticulture, manufacture of surgical instruments, pottery, small services, and small businesses, as well as for small cottage industries. The company was incorporated in 1995 and is based in Kolkata, India. It has branches in India.

Bandhan is working towards the twin objective of poverty alleviation and women empowerment. It started as a Capacity Building Institution (CBI) in November 2000 under the leadership of Mr. Chandra Shekhar Ghosh. During such time, it was giving capacity building support to local microfinance institutions working in West Bengal. Bandhan opened its first microfinance branch at Bagnan in Howrah district of West Bengal in July 2002. Bandhan started with 2 branches in the year 2002-03 only in the state of West Bengal and today it has grown as strong as 412 branches across 6 states of the country! The organization had recorded a growth rate of 500% in the year 2003-04 and 611% in the year 2004-05. Till date, it has disbursed a total of Rs. 587 cores among almost 7 lakh poor women. Loan outstanding stands at Rs. 221 cores. The repayment rate is recorded at 99.99%. Bandhan has staff strength of more than 2130 employees.

Operational Methodology

Bandhan follows a group formation, individual lending approach. A group of 10-25 members are formed. The clients have to attend the group

meetings for 2 successive weeks. 2 weeks hence, they are entitled to receive loans. The loans are disbursed individually and directly to the members.

Economic and Social Background of Clients

Landless and asset less women

Family of 5 members with monthly income less than Rs. 2,500 in rural and Rs. 3,500 in urban

Those who do not own more than 50 decimal (1/2acre) of land or capital of its equivalent value

PRODUCT PROFILE OF BANDHAN LTDLOAN PRODUCT

BOARD OF DIRECTORS

Director Name DesignationShri Chandra Shekhar Chairman and Managing Director

Ghosh

Mr. Abhijit Ghosh Assistant General Manager of Finance

Mr. Rahul Mitra Company Secretary

Mr. Ronendra Choudhury General Manager

Mr. Pritish Saha Assistant General Manager

CONCEPTUAL DESCRIPTION

Evaluating progress of the Indian microfinance sector from an investor’s perspective

The microfinance sector in India has developed a sustainable business model that has overcome challenges traditionally faced by the financial services sector in servicing the low-income population. The paper states that the Indian microfinance sector:

Generates a Return on Equity of 20 – 30 percent, driven by commercial bank financing, strong operating efficiency and high portfolio quality;

Is increasingly becoming a viable investment sector for commercial and social investors given its growth and maturity;

Has equity valuations that are higher than the financial sector due to high growth expectations and substantial availability of debt;

Can expect growth in availability of debt to support expansion as more domestic banks and alternative debt providers enter the market;

Can, over the short and medium term, see MFI shares trade at significant premia to book value and cool down over the longer term as the industry matures.

Finally, the Indian microfinance sector presents several exit opportunities including secondary and trade sales as well as mergers and acquisitions. Larger MFIs may also consider going public.

Credit Demand of the Poor

It is estimated that in India there exist approximately 7.5 crores poor households, out of which 6 crores are rural and 1.5 crores urban

households. One estimate assumes that the total annual requirement of credit for the rural poor families would be at least Rs.15, 000 crores on the basis of a maximum need of Rs.2000/- per family. Another estimate for requirement of credit (excluding housing) is Rs.50, 000 crores assuming that annual average credit usage are Rs.6000/- per rural household, and Rs.9000/- for poor urban household. An additional Rs.1000 crore is estimated to be required for housing per year. Apart from micro-credit, they require savings and insurance also. Meanwhile, bank advances to weaker section aggregated Rs.9700 crore during 1997-98. MFIs and SHGs are estimated to have provided about 137 crore (cumulative up to September 1998). 1 The above scenario, suggests a vast unmet gap in the provision of financial services to the poor. Moreover, 36% of the rural households are found to be outside the fold of institutional credit.

Growth of microfinanceThe growth of microfinance is visible in many aspects. There are more than 2000 NGOs involved in the NABARD SHG-Bank linkage program. Out of these, approximately 800 NGOs are involved in some form of financial intermediation. Further, there are 350 new generation co-operatives providing thrift and credit services. According to our estimate, the present total outstanding, including Sa-Dhan members and bank linkages is approximately Rs.700 crores (Rs. 150 crores of Sa-Dhan members and another Rs. 550 crores from the Banking system). The total client base is estimated at 6-8 million as opposed to the Government of India (GOI) intention to reach 25 million clients. The growth of community institutions has taken place with the role to take social and financial intermediation. A numbers of community banks have come into existence at village and block levels call ' Federation of Self Help Groups'.

The inadequacies of the formal financial system to cater to the needs of the poor and the realization of the fact that the key to success lies in the evolution and participation of community based organizations at the grassroots level led to the emergence of new generation of MFIs.

One kind of MFI is an NGO engaged in promoting Self Help Groups (SHGs) and their federations at a cluster level and linking SHGs with Banks under the Scheme. Examples are Myrada in Karnataka, which has promoted Sanghmitra, a company of its village saving and credit sanghas, PRADAN which has established a large number of SHGs and federated them under Damodar in Bihar, Sakhi Samiti in Rajasthan.

Another kind is NGO-MFI directly lending to the poor borrowers, who are either organized into SHGs or into Grameen Bank type of groups after borrowing bulk funds from SIDBI, RMK and FWWB. Examples in this category are Rashtriya Gramin Vikas Nidhi (RGVN) which runs credit and savings programme in Assam and Orissa on the lines of Grameen Bank,

Bangladesh. Also we have SHARE in AP, ASA in Tamil Nadu under this category.

There are MFIs which are specifically organized as cooperatives, such as over 500 Mutually Aided Cooperative Thrift and Credit Socities (MACTS) in AP, promoted among others by Cooperative Development Foundation (CDF) and the SEWA Bank in Gujarat which also runs federations of SHGs in nine districts.

THEORETICAL BACKGRONDROLE OF MICROFINANCE

The micro credit of microfinance programme was first initiated in the year 1976 in Bangladesh with promise of providing credit to the poor without collateral , alleviating poverty and unleashing human creativity and endeavor of the poor people. Microfinance impact studies have demonstrated that

Microfinance helps poor households meet basic needs and protects them against risks.

The use of financial services by low-income households leads to improvements in household economic welfare and enterprise stability and growth.

By supporting women’s economic participation, microfinance empowers women, thereby promoting gender-equity and improving household well being.

The level of impact relates to the length of time clients have had access to financial services.

ADVANTAGE OF MICROFINANCE

An effective way to fight poverty

Microfinance has proven to be a very effective development tool because it provides empowerment instead of charity. Typically, microfinance

clients are self-employed household entrepreneurs who lack the resources to invest in their business and their future and thus cannot escape the grips of extreme poverty. Here is a typical microfinance success story taken from the United Nations Capital Development Fund

Banking services at your doorstep

An incredible feature of microfinance is its convenience. Credit officers, usually locals, are hired by the MFI branch office and have the task of going from village to village (or house to house in urban areas) to collect and disburse funds. This is very convenient for clients because they rarely have to travel in order to receive their banking services. Often the credit officer will also organize group meetings at which a variety of activities can take place. This provides an opportunity for the community to give feedback and to exchange knowledge.

BENEFITS OF MICROFINANCE

1) It isn't a hand out -

As mentioned earlier, microfinance isn't about just giving out money to the poor. On the contrary, these are small loans that are paid back with interest. Of course, many people are skeptical when it comes to giving the poor financial loans. However, they are surprised to learn that of the over 100 million microfinance loans that have been given out, 97% of them have been repaid. That's why you can't consider microfinance a hand out, but rather, it's a hand up.

2) It allows the poor to receive a loan-

Traditionally, the poor have been unable to receive loans. That's because they don't have anything to offer as collateral. As a result, they get stuck in a vicious cycle of poverty, living and working in poor, rural areas. Should adversity strike, they simply don't have the means to combat it. Microfinance allows the poor to get the loans they need to save, invest, and create a sustainable lifestyle of financial independence and growth. These loans are used productively by the poor to create their own businesses, grow their assets, and get out of poverty once and for all.

3) It empowers women-

Many efforts of the microfinance industry are aimed at empowering women to create their own businesses. From microfinance India to microfinance in other developing countries, small loans are given to those women who live on less than $1 per day. By giving these poor women loans, the microfinance industry not only helps them pull themselves out of poverty, but it also promotes gender equality throughout the world.

4) It creates long-term fina ncial independence -

The most important benefit of microfinance in India is that it helps create long-term financial independence in these poverty-stricken areas. See, it's one thing to send money, clothes, and other goods to the poor. It's a great gesture, but the results of this traditional style of charity are short-lived. Microfinance loans help create sustained impact by educating recipients on how to create their own businesses and how to properly manage and grow their money.

OBJECTIVE OF MICROFINANCE

Traditionally, when a person wants to start a business venture, they go to a bank for a loan. But what should a budding entrepreneur do if he is too poor to obtain financing to start a profitable business? The answer lies in a relatively new branch of financial services called microfinance. Its purpose is to provide basic financial services such as loans, savings and insurance to underprivileged people. A microfinance institution (MFI) is simply one that offers such services to the poor; according to the Consultative Group to Assist the Poor (CGAP), it can be a credit union, commercial bank, financial non-governmental organization, or a credit cooperative. Following is a list of the main purposes of microfinance.

Provide Access to Funds

Typically, the poor acquire financial services like loans through informal relationships. These loans, however, come at a high cost per dollar loaned and can be unreliable. Furthermore, banks have not traditionally viewed poor people as viable clients and often will reject them due to unstable credit or employment history and lack of collateral. MFIs dismiss such requirements and provide small loans at high interest rates, thus providing MFIs the funds they need to continue operation.

Encourage Entrepreneurship and Self-Sufficiency

Underprivileged people may have potentially profitable business ideas, but they cannot put them into action because they lack sufficient capital for start-up costs. Microcredit loans give clients just enough money to get their idea off the ground so they can begin turning a profit. They can then

pay off their micro-loan and continue to gain income from their venture indefinitely.

Manage Risk

Microcredit can give impoverished people enough financial stability to cross from simply surviving to accruing savings. This gives them protection from sudden financial problems that could have been devastating. Savings also allow for educational investment, improved nutrition, better living conditions and reduced illness. Microinsurance provides people the ability to pay for health care when needed, so they can receive treatment for health conditions before they become grave and more costly to treat.

Empower Women

Women make up a large proportion of microfinance beneficiaries. Traditionally, women (especially those in underdeveloped countries) have been unable to readily participate in economic activity. Microfinance provides women with the financial backing they need to start business ventures and actively participate in the economy. It gives them confidence, improves their status and makes them more active in decision-making, thus encouraging gender equality. According to CGAP, long-standing MFIs even report a decline in violence towards women since the inception of microfinance.

Community-Wide Benefits

Generally speaking, microfinance institutions seek to reduce poverty worldwide. As they obtain funds and services from MFIs, recipients gain enormous financial benefits which trickle down to others in their families and communities. New business ventures can provide jobs, thereby increasing income among community members and improving their overall well-being. Microfinance services gives hope to people who previously had little or no opportunity to be self-sufficient.

TOP TEN MICROFINANCE COMPANIES

1) SKS Microfinance Ltd (SKSMPL)

2) Spandana Sphoorty Financial Ltd (SSFL)

3) Share Microfin Limited (SML)

4) Asmitha Microfin Ltd (AML)

5) Shri Kshetra Dharmasthala Rural Development Project (SKDRDP)

6) Bhartiya Samruddhi Finance Limited (BSFL)

7) Bandhan private financial services ltd

8) Cashpor Micro Credit (CMC)

9) Grama Vidiyal Micro Finance Pvt Ltd (GVMFL)

10) Grameen Financial Services Pvt Ltd (GFSPL)

LENDING PROCESS OF MICROFINANCE LOAN

Examples of enterprises established include, buying a buffalo to sell its milk; starting a kirana store; manufacturing sweets; selling soft drinks; grinding spices; sewing; candle making; collecting fallen hair for wigs and extensions; repairing watches; tea or petty shops; vegetable stands; bicycle repair; carpentry and welding shop or an auto rickshaw.

In groups of five to ten, the women support each other emotionally and financially by guaranteeing the repayment of each of their loans. With as little as INR 4,000 (USD 85), a borrower can start a kirana store. With INR 10,000 (USD 212), a borrower can purchase a milking cow / buffalo, sewing machine, or set up an embroidery unit. Many of the women become leaders in their communities and undertake projects that benefit all the residents.The repayment of loans plus interest generates funds that can be reinvested as a second and third loan or used to start other women on their journey toward sustainable prosperity. The entire community benefits from improvement projects taken on by these newly confident and capable leaders. Microfinance institutions broadly operate under a wide range of legal structures. They could be registered as NGO, Trusts, Sec 25 Companies, Cooperative Societies, Cooperative Banks, Regional Rural Banks, Local Area Banks, Public and Private Sector banks, Business Correspondents and Non-Banking Finance Companies.

SKS & BANDHAN Microfinance is registered with the RBI as a non-deposit taking NBFC and is regulated by the RBI.

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