Presentation Microfinanceindustry Feb2014 Sushilchokhandre 140210053230 Phpapp02

8/12/2019 Presentation Microfinanceindustry Feb2014 Sushilchokhandre 140210053230 Phpapp02

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Presentation onMicro Finance

Sushil Chokhandre

Updated on : Feb 2014


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Micro finance

Sushil Chokhandre

Provision of financial services such as savings,

credit &insurance

to unemployed or low-income individuals or groups whichfall below the poverty line


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Current Scenario Indian Market

India's GDP growth is expected to slow to an 11-yearlow of less than 5% in the fiscal year ending March.

35-37% population below poverty level.

450 million unbanked people in India who live in ruralareas

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credit.

Estimated credit demand: USD 14 bn

Demand met so far: USD 700mn

Next 3-5 years, around 65% of the rural population willhave access to MFIs.


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Current Micro-Finance industry

ICRA report:

The market potential:Rs.1.4-Rs 2.5 lakh crore.

Current size of the microfinance market:

Rs.60,000crore.

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MFIs are extending only small-value loans.

a typical loan size is Rs. 10,000 and many borrow

from two MFIs which is lower than the Rs. 35,000-

45,000 loans that many households are

demanding.

Growth: at 30-35 per cent a year over the next

three years.


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Microfinance companies

Micro Finance Institutions (MFIs) are the key players in helping andsupporting the cause of financial inclusion.

Micro-finance companies in India usually borrow from mainstream banks

and provide loans as small as $US200 to poor borrowers, mostly women,for starting small businesses such as buying livestock.

The micro-loan companies operate in areas where there are no bankbranches and people traditionally have relied on loan sharks who charge

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exorbitant rates. The MFIs are reaching to the 70% of the poorest districts of India

Few Major MFIs - SKS Microfinance.

Grama Vidiyal Asmitha Microfinance Cashpro Microfinance Trident microfinance Samridhi Microfinance


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Types of MFIs

MFIs include non-governmental organizations (NGOs),credit unions, non-bank financial intermediaries, and evenafew commercial banks.

Classification: Not for Profit MFIs NGO-MFIs

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Non-Profit Companies Mutual Benefit MFIs Mutually Aided CooperativeSocieties (MACS) and set up

institutions.

For Profit MFIs Non-Banking Financial Companies ( NBFCs)


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Micro finance models

Conventional Method community-based or in-house banking

Bank Partnership Model The bank acts as the lender and the MFI acts as

an agent which takes care of work related tosupervision, recovery and credit monitoring.

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Banking Correspondents MFIs are allowed to collect the savings from the

targeted population on behalf of the bank.

Service Company Model Bank forms its own MFI perhaps as an NBFC, and

then it works together with that particular MFI toprovide loans and other services.


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Micro Finance - Streams

Demand Stream Forum of clients primary poor SHGs and un-organised

individual clients. Association/organisations of poor SHGs and its federations,

cooperatives (community ownership and governance)

Enabling Stream Promotional institutions: NGOs, philathropic institutions,

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Regulatory institutions: RBI/ State and Central Goverments .

Supply Stream** Savings and credit

Commercial ,rural and Private Banks Cooperative banks Speacialised developemtn financial institutions ( housing

banks, SIDBI) Insurance companies Post office


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SWOT Analysis - Strength

Reliable business model.

Reduces poverty

Attract investors looking to spread risksand diversify their portfolios.

Focus on consumer protection,trans arenc , and overnance.

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Strong support from banks & NGOswho are able to access bulk funds foron-lending.

Huge networking available.

SHG bank linkages- widely adoptedapproach involving bank, NGOs & poor


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SWOT Analysis: Weaknesses

Not properly regulated.

High interest rate than the rates chargedon normal bank loans.

High transaction cost

Large segment is still untouched due toaccess problem.

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Many poor still prefers informal providers(local Zamindars, Chit Funds) of financewhich charge at a high interest rate.

MFIs targets WOMEN.

Many places in States such as UttarPradesh, Bihar and Madhya Pradesh areunder-served.

Loan fatigue- poor recovery, politicized


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Opportunities

Rate ceilings from Govt.

Huge demand and supply gap

Huge potential & heavy need for this market. Participation of private industries and

institutions.

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Inclusion of innovative models and initiatives.

Employment Opportunity

Opportunity for Pvt. Banks

Government should encourage competition,capacity building, and innovation to lowerinterest rates, and costs in microfinance.


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Threats

Neophyte Industry

Global financial storm

Uncertain regulatory future due to theunderlined concerns.

High Competition

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policies and procedures of central bankswhich might pose hurdles to poor people.

Risks to MFIs Credit risk, Operational risk,strategic risk, liquidity risk, market risk,fraud and legal risks, reputation risk,External business risk.

Over involvement of Government


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Sushil Chokhandre

This presentation has been madefrom my understanding of the

concept through internet,through various sources..

This ppt is for reference only.

Presentation Microfinanceindustry Feb2014 Sushilchokhandre 140210053230 Phpapp02

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