MICRO FINANCE

Outline of presentation

What is microfinance? About micro finance Micro finance in INDIA The profile of micro finance in India Challenges in Micro Finance Growing interest in Microfinance

What is micro finance?

Micro finance is the supply of loans, savings, & other basic financial service to the poor. To most microfinance means providing very poor families with very small loans (micro credit) to help them engage in productive activities or grow their tiny business

Microfinance: what is it?

What it often is Micro-credit Group lending Social/charitable activity What it really should be

Range of financial services Group and individual lending Profitable activity

About micro finance

The modern micro finance movement dates back to the 1970s. When experimental programs in Bangladesh, Brazil & a few other countries began to extend tiny loans to groups women to invest in micro enterprise.

By leading to group of women where every member of the group guaranteed the repayment of all members, these micro credit programs challeged the prevailing conventional wisdom & provide that poor without collateral could be credit worthy. When offered the opportunity, they would repay loans with interst at extraordinary rates of repayment.

Credit

Micro finance refers to loans, savings, insurance, transfer service & other financial products targeted at low incom clients.

Micro finance credit refers to a small loan toa client made by a bank or other institution. Micro credit can be offered, often without collateral, to an individual or throgh group lending

Micro finance in INDIA:

Evolution of micro finance in India: Micro finance has been in pratice for ages (through informally) Legal framework for establishing the co-operative movement set up in 1904. Reserve bank of India Act, 1934 provided for the establishment of the agriculture credit development. Nationalization of banks in 1969. Regional rural banks crated in 1975. Established as an apex in 1975. Passing of mutually aided co-op Act in AP in 1995

The profile of micro finance in India:

The scenario, estimated that 350 million people live below poverty line. This translates to approximately 75 million households. Annual credit demand by the poor in the country, is estimated to be about RS 60000 crores. Cummulative disbursements under all micro finance programmes is only about RS 5000 crores. Only 5% of rural poor have access to micro finance.

Challenges in Micro Finance

High Volume of Financial Transaction but value wise very low Majority of the financial transactions are off-site in nature Geographic spread of operations and density of customers Lack of infrastructure facilities like power, broadband etc Unsecured lending and no documented financial history is available Combination of above, lead to high operating cost

Growing interest in Microfinance

Private Investors and equity funds are now financing fast growing and nascent MFIs Some state governments are funding SHGprogrammes Govt. of India has appointed NABARD to manage the Microfinance Development & Equity Fund (MFDEF) Microfinance Bill pending in Parliament

CMFR: The Centre for Micro Finance Research

Objectives

Fill gaps in understanding of microfinance:

Extent and channels of impact What programme designs work and what do not? What programme variants can increase impact?

Fill gaps in practice of microfinance: limitation to micro-credit, lack of financial capacity

Mission
The Centre for Micro Finance Research will aim to help improve the life of the poor by: Systematically researching the links between access to financial services and the participation of the poor in the larger economy Participating in maximizing access to financial services and its impact for poor through:

Research on micro finance and livelihood financing Research-based policy advocacy High level training for practitioners and institutions Strategy building for Micro Finance Institutions

CONCLUSION:

Rigorous research is needed to understand the nature of demand and households financial and psychological behavior. Rigorous experiments allow to measure impact without bias, and also to look at the effectiveness of product designs, as well as answer behavioral questions

SUGGESTION:

Annual growth rate of 20% during the next 5 year. Assess your MIS needs Initiate the process Acquire good MIS Adopt IT in your business Make your work simple ..

 IF YOU ARE UPLIFTING THE POOR YOUR UPLIFTING THE NATION

Micro-credit has been changing people's lives and revitalizing communities