What is microfinace ppt imp.pptx
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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)
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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.
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Micro finance (case study)
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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.
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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.
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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.
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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.
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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.
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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.
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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
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Urban Poor
KYC norms of Banks and NBFC require proofof residence (unable to provide).
Requires facilities like housing finance, healthinsurance, remmitances, saving andinvestments
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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
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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).
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CHALLENGES FACED BY MFIS
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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)
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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
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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.
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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.
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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
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FUTURE OF MICROFINANCE
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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)
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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
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