Intro to Micro Finance

8/8/2019 Intro to Micro Finance

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Indroduction to Microfinance

MBA Studesnts ofMATS Institute of Management & Entrepreneurship

Session on

By

Vivekanand N Salimath, Managing Trustee

Initiatives for Development Foundation

To


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10/16/2010

The Task Force on Supportive Policy andRegulatory Framework for Micro Finance defines

mF 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 toraise their income levels and improve living

standards

What is Micro Finance


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Informal financial service providers

Moneylenders,

Pawnbrokers,

Savings collectors

ROSCAs, andInput supply shops


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Member-owned organizations

Self-help groups

Credit unionsFinancial service associations

CVECA: self-reliant village savings and

credit bank


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Brief History

Modern microfinance emerged in the 1970s with astrong orientation towards private sector

solutions.

This resulted from evidence that state-ownedagricultural development banks in developingcountries had been a monumental failure

Nevertheless public officials in many countrieshold a different view, and continue to intervene inmicrofinance markets.


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Some principles of Micro FinancePoor people need not just loans but also savings, insuranceand money transfer services.

Microfinance must be useful to poor households: helping them

raise income, build up assets and/or cushion themselvesagainst external shocks.

Microfinance can pay for itself. Subsidies from donors andgovernment are scarce and uncertain, and so to reach largenumbers of poor people, microfinance must pay for itself.

Microfinance means building permanent local institutions.

Microfinance also means integrating the financial needs ofpoor people into a countrys mainstream financial system.


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Some principles of Micro FinanceThe job of government is to enable financial services, not to

provide them.

Donor funds should complement private capital, not compete

with it.

The key bottleneck is the shortage of strong institutions andmanagers. Donors should focus on capacity building.

Interest rate ceilings hurt poor people by preventing

microfinance institutions from covering their costs, whichchokes off the supply of credit.

Microfinance institutions should measure and disclose theirperformance both financially and socially


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Microfinance: delivery modelsSelf Help Groups

Home grown co-operative like

Savings based / savings led

Meeting diverse needs

largely promoted by NABARD-Public Sector Banks-Self HelpPromoting Institutions (NGOs)

Performance mixed

Grameen

RegimentedLoan based

Focussedon enterprise

Pace of growth might be a cause for concern

Individual lending BASIX and MACS


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06/03/07

BANK

Govt/NGO

(trg& capacity building)

SHGs

CLIENTS

SHG BANK LINKAGE MODEL I

CREDIT

PROMOTION

TRAINING

SHG Bank Linkage Model -1


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SHG Bank Linkage Model -2

BANK

NGO( s fi i l

i terme i r)

SHGs

I TS

SHGBANK INKAGE ODEL- II

EDI

LIENT

PROMOTION

TRAINING

CREDIT


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Grameen Model

Joint LiabilityGroup

Center


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Legal Forms: Indian MFIs


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Not for Profit: Issues


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Society


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Society - Regulations


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Trusts


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Section 25 Company


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Section 25 Company Regulations


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NonB

anking Finance Co (NB

FC)


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NBFC Regulations -1


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NBFC Regulations - 2


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Co-Operative Societies


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Co-Operative Societies-Regulations


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Urban Co-Operative Bank


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UCB - Regulations


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Legal forms and Source of Finance


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The Top 10 MFIsRank Name Country1 ASA Bangladesh

2 Bandhan (Society and NBFC) India

3 Banco do Nordeste Brazil

4 Fundacin Mundial de la MujerBucaramanga Colombia

5 FONDE PMicro-Crdit Morocco

6 Amhara Credit and Savings Institution Ethiopia

7 Banco Compartamos, S.A., Institucin de Banca Mltiple Mexico

8 Association Al Amana for theP

romotion of Micro-EnterprisesMorocco

Morocco

9 Fundacin Mundo Mujer Popayn Colombia

10 Fundacin WW B Colombia - Cali Colombia


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The Top 6 MFIs of India

Rank Name

2 Bandhan (Society and NBFC)

13 Microcredit Foundation of India

19 Grameen Koota

23 Sharada's Women's Association for Weaker

Section

29 Asmitha Microfin Ltd.

44 SKS Microfinance Private Limited


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Major players in the movement:

Grameen Bank

BRAC- Bangladesh Rural Advancement Committee

ASA - Association for Social Advancement

Proshika (Training Education and Action)

MFIs in Bangladesh

Intro to Micro Finance

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