Micro Finance

T.Y.B.B.I. Microfinance

EXECUTIVE SUMMARY

Microfinance is yet another area where banks can play an active role.

The objective of microfinance is to deliver a wide range of financial services

like deposits, advances, insurance and other related products to people

engaged in agricultural, small enterprise and poor people in order to increase

their standard of living. Finance, which is basically an institutional/group

finance instead of lending to individual beneficiaries unlike in the case of

priority sector/rural lending, is extended to SHGs or NGOs. Moreover, there

are no subsidies or interest concessions and the basic concept in

microfinance is to give a timely finance to the needy people. Therefore,

transaction costs are cheaper and profitability is better under microfinance

when compared to the conventional rural lending. In view of these factors in

the long run, microfinance is likely to replace the conventional and

concessional rural lending. There is ample scope for private & foreign banks

to venture into this activity due to the above mention advantage. Rural India

an its economy is mainly depend on monsoons. Famine and floods both

occur at the same time in different parts of the country causing damage to

the crops. Therefore, rural insurance has to be an effective tool in hedging

these risk factors. Government, banks and insurance agencies have to

together evolve a more proactive and vibrant measures to deal with this

issue, both at micro and macro level.

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OBJECTIVES

The objective of undertaking a project on Microfinance is to have in-

depth knowledge about the current rural development by banks and

government.

Objective behind these project are:

To make a comprehensive study the about the microfinance.

To know about the competition and challenges faced by the

banks in order to survive in the market.

To know the future scope involved in Microfinance Industry.

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INTRODUCTION

India is the largest democratic country and one of the fastest growing

economies in the world. It is the second most populous country after China,

with 1.1 billion populations in 2007.

The improving economic conditions and steady rise in Gross

Domestic Product (GDP) growth rate have put the country in the center of

focus in global business environment. With a huge population and an

increasing number of the consuming class, the Indian economy was ranked

among top 15 economies of the world. The agricultural growth coupled with

steady expansion of industry and services contributed to a high GDP growth

rate. It shows in the below:

In spite of these developments, nearly 400 million people lived on less

than $1 a day in India in 2005. According to the data available for the year

2006, more than 35% of the population in India earned about less than a

dollar a day. Nearly 70% of the total population lived in rural areas, while

about 30% lived in urban areas in 2006. According to the government

statistics, 70% of the poor (nearly 225 million) lived in the villages, with per

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capita consumption expenditure of Rs. 356 ($8.70) a month or Rs. 11.70

($0.28) a day. The majority of rural poor were mainly involved in the

agricultural activities employed by the local landowners. The others

followed caste-oriented occupations like priests, carpenters, blacksmiths,

barbers, weavers, potters, oil-pressers, leatherworkers, sweepers, etc. Thus,

the incomes generated from such activities were far from ‘acceptable’.

The majority of the rural population was neither prosperous nor had

enough security to approach formal financial institutions for its credit needs.

It lacked access to formal financial intermediaries, including basic saving

services. This created the need for microfinance, which meant any activity

that provided financial services as credit, savings, and insurance to low

income individuals with a goal of creating social value. The social goal

included poverty alleviation and improving livelihood opportunities through

the provision of capital for micro enterprise and insurance and savings.

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WHAT IS MICROFINANCE?

Microfinance refers to the provision of financial services to low-

income clients, including the self-employed. The term also refers to the

practice of sustain ably delivering those services.

More broadly, it refers to a movement that envisions “a world in

which as many poor and near-poor households as possible have permanent

access to an appropriate range of high quality financial services, including

not just credit but also savings, insurance, and fund transfers.”

Microfinance could be defined as the provision of a broad range of

financial services such as deposits, loans, money transfers and insurance to

the poor, low income households and micro-enterprises. Another definition

of microfinance is the small scale financial services provided to the people

who work in agriculture, fishing, herding; who operate small or micro

enterprises; who provides services; who work for wages or commission; and

other individuals or groups at the local level of developing countries, both

rural and urban. Financial services usually include credit and savings, but

there are micro-finance institutions who provide additional services also,

such as issue of cheques, drafts, guarantees etc. The Task Force constituted

by NABRD defined micro-finance as ‘provision of thrift, credit and other

financial services and products of very small amounts to the poor in rural

and semi-urban or urban areas for enabling them to raise their income levels

and in improving living standards.

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Improving the access of these bypassed people to financial services is

one of the tools to improve their financial condition and also to enable them

to contribute optimally to the overall economic development of the

community.

The origins of institutionalizing micro-finance could be traced to the

beginning of the cooperative movement in Germany. The famed Raiffeisen

Societies were perhaps the first institutional structures which attempted to

provide loans to the peasants for developing their businesses and freeing

them from the money lenders who charged very high rates of interest. In

India, the enactment of the cooperative societies Act in 1904 was the

beginning of micro-finance. The objectives of the enactment were the same

which had led to the establishment of Raiffeisen Societies i.e. to provide

credit to the farmers and combating the problems of usury and indebtedness

to the village money lenders. The urgency to improve agriculture and

keeping in view the widespread poverty, oppression and ignorance, the state

became increasingly involved in the financial markets. On the

recommendation of the All India Rural Credit Survey Report, the State

partnership in credit cooperatives started.

Over time, the Government’s involvement in the credit cooperatives

increased and the credit cooperatives (by and large) ceased to be

autonomous people’s institutions and are now seen more as a state

instrument. The Government of India has also taken a number of steps to

improve the flow of institutional credit to the small and marginal farmers

(SMF) in particular and other rural population in general. The expansion of

the branch network of the nationalized banks, establishment of the RRBs,

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the priority sector and other targets [agricultural loans, loans to weaker

sections etc.] for commercial banks, the Differential Rate of interest scheme,

programmes like IRDP, SGSY etc. were intended to improve the access of

the rural people to credit and to improve their incomes. However, some of

these, particularly the Differential interest rate lending the IRDP, SGSY etc.

were more in the nature of poverty alleviation schemes and not so much for

improving the access of the bypassed rural population to the financial

services.

The expansion of the network of the banking system in the rural areas

helped in bringing banking to the masses. The institutional credit which

accounted for only 7% of the borrowings of the rural households in 1951-52

increased to 61.2% in 1981, but came down to 56.6% in 1991. Tanks to the

efforts of the banking system, the agriculture credit flow during 2003-04 has

reached a massive Rs. 80000 crore. The credit flow to the agriculture sector

has been registering as decadel annual growth rate of around 14 to 15%

which means the doubling of credit flow in about every five years or so.

Inspite of these massive gains, it is believed that the formal sector only

accounts for the tip of the iceberg of rural finance. A large part of the rural

financial flows is transacted in the informal sector and remains unreported.

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DEFINITION OF MICROFINANCE

Microfinance refers to the provision of financial services to poor or

low-income clients, including consumers and the self-employed. The term

also refers to the practice of Sustainability delivering those services.

More broadly, it refers to a movement that envisions “a world in

which as many poor and near-poor households as possible have permanent

access to an appropriate range of high quality financial services, including

not just credit but also savings, insurance, and fund transfers.

The Task Force on supportive Policy and Regulatory Framework for

Microfinance created by NABARD suggests a working definition of

microfinance as “provision of thrift, credit and other financial services and

products of very small amounts to the poor in rural, semi-urban or areas for

enabling them to raise their income levels and improve living standards”.

As per one of the working groups of RBI “Microfinance refers to

small saving, credit and insurance services extended to socially and

economical disadvantaged segments of society. In much more broader

context it include capacity building, training, marketing of products,

establishing forward and backward linkage to micro-enterprise”

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Microcredit

It is generally observed that that poor people do not have access to

bank loans. Private money lenders charge very high interest rates. This

makes it difficult for poor people to access funds for starting small income

generation activities like sewing, buying buffalo, opening a tea stall or some

other small shop. The microcredit summit, held in Washington DC (1997)

defines Microcredit as, “extending small loans to poor people for self-

employment project that generate income, allowing than to care for

themselves and their families.” (Swaminathan, M., 2007) Microcredit caters

the need of people for small loans. Microfinance includes support services

along with the loan components. In Microcredit, more emphasis is placed on

providing loans.

Microfinance, thereby, open up channels for thrift, market assistance,

technical assistance, capacity building, social and cultural programmes.

Thus, microfinance has an element of ‘Credit plus’ while microcredit is

‘only credit’.

NEED FOR EMERGENCE OF MICROFINANCE

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Most of the countries in the world are either in the category of

developing or underdeveloped economy. When compared with developed

countries, developing and underdeveloped countries have more population

and less resources.

In any economy, most of the day-to-day activities require money.

Money is mandatory for education, wedding, health, etc. The financial needs

of any human being can be divided into lifecycle, needs, personal

emergencies, disasters, invest opportunities, etc.

Agriculture is the main occupation for those in rural areas. The

farmers have to invest money to buy seeds, fertilizers, land and various

requirements for agriculture. But because of their financial crisis, they find it

difficult to buy them. So they usually depend on moneylenders and other

informal financial sources. The formal financial institutions do not much

interest in lending to the rural poor. There are millions of them who are

presently suffering from the high interest rates and debt overhang in the

developing and underdeveloped countries.

There are two basic strategies that can help the poor to meet their

needs. The strategy of providing money before the need arises is known as

‘Saving Up’. When a need arises, to fulfill the need, people borrow money.

Later they save money to repay the loan. It is known as ‘Saving Down’.

The above fact has given rise to microfinance. This is purely based on

the fact that poor can save, borrow or lend and even repay their debts. These

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findings have led to other great inventions like liquid-yields options. The

fundamentals financial services, like savings, credit and insurance provide

an opportunity to people to borrow, save, invest and protect against risks.

Poor people require basic insurance option, saving services and realistic

remittance systems to manage their assets and generate income. But with

little income, they are unable to manage their lives and, moreover, they are

not able to borrow money from banks. Hence, they tend to rely on informal

financial institutions, like village moneylenders, pawn-brokers, Rotating

Savings and Credit Associations (ROCSAs), Accumulating Savings and

Credit Associations (ACSAs), savings collections, supply shops, money

guards etc. which usually charge a high rate of interest on whatever is lent.

In India the apex financial institution which provide microfinance are

National Bank for Agriculture and Rural Development (NABARD),

Commercial Banks, Small Industries Development Bank of India (SIDBI),

Regional Rural Banks, Co-operative Banks, Non Banking Financial

Companies (NBFCs), etc.

ORIGIN OF MICROFINANCE

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In order to reduce poverty, Bangladesh had introduced microfinance

in the name of Grameen Bank in 1976. The major objects of this project was

to facilitate and promote the standard of living of the poor by providing the

thrift (savings), credit and other financial services such as microcredit, micro

savings, micro insurance, etc. These institutions are financial non-

governmental organizations, financial cooperatives, etc. They provide small

amounts of credit at reasonable interest rates. Although credit is an

important part of microfinance, it is just one of the assorted financial

services which help to improve the lives of poor across the world. These

institutions help to spread the business in rural areas and stimulate the local

economic growth.

NABARD was carved out of the Reserve bank of India in 1982; the

apex financial institution for the development of the agriculture and rural

areas was constantly challenged to strengthen the rural credit delivery

system so as to enable the rural poor to access small loans from financial

institution. With perhaps one of the most impressive institutional

infrastructures, this should not being difficult task, particularly given the fact

that most of the banks were government-owned. To supplement credit

provision in the rural areas, Regional Rural Banks (RRBs) were established

across the country in 1975, in addition to the already existing institutional

infrastructure of the cooperative and land development banks. Coupled with

statutory priority-sector lending obligations, the flow of finance to the rural

poor under poor under this regime should not have been an issue.

MICROFINANCE SECTOR IN INDIA

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Microfinance has demonstrated the potential of building the social

capital of the poorest communities. The Asian journey begins with India

where the country’s first microfinance institution was set up in 1974, earlier

than the famous Grameen Bank which was set up in 1976. However, the

microfinance movement accelerated in the 1980s only. Like in other Asian

countries the operation was through small loan to ‘Self Help Groups’ of

women. From this small beginning, the microfinance sector grown

significantly in the past decade and half. National bodies like the Small

Industries Development Bank of India (SIDBI) and the National Bank for

Agriculture and Rural Development (NABARD) are devoting significant

time and financial resources on microfinance.

These points to the growing importance of the sector. The strength of

the microfinance sector in India is the diversity of approaches and forms that

have evolved over time. In addition to the home grown models of SHGs and

Mutually Aided Cooperative Societies (MACS), the country has learnt from

other microfinance experiments across the world, particularly Bangladesh,

Indonesia, Thailand and Bolivia, in terms of delivery if microfinance

services. Indian organization can learn from the transformation experience

of these microfinance initiatives.

WHAT IS EXCITING ABOUT INDIAN MICROFINANCE?

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A Task Force on Microfinance recognized in 1999 that microfinance

is much more than microcredit, stating: "Provision of thrift, credit and other

financial services and products of very small amounts to the poor in rural,

semi-urban and or urban areas for enabling them to raise their income levels

and improve living standards". The Self Help Group promoters emphasize

that mobilizing savings is the first building block of financial services.

For many years, the national budget and other policy documents have

almost equated microfinance with promoting SHG links to the banks. The

central bank notification that lending to MFIs would count towards meeting

the priority sector lending targets for Banks offered the first signs of policy

flexibility towards MFIs. One could argue that MFIs are small and

insignificant, so why bother. The larger point is about policy space for

innovation and diversity of approaches to meet large unmet demand. The

insurance sector was partially opened to private and foreign investments

during 2000. Over 20 insurance companies are already active and

experimenting with new products, delivery methodologies and strategic

partnerships.

Microfinance programmes have rapidly expanded in recent years.

Some examples are:

Membership of Sa-Dhan (a leading association) has expanded from 43 to 96

Community Development Finance Institutions during 2001-04. During the

same period, loans outstanding of these member MFIs have gone up from

US$15 million to US$101 million.

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The CARE CASHE Programme took on the challenge of working

with small NGO-MFIs and community owned-managed microfinance

organisations. Outreach has expanded from 39,000 to around 300,000

women members over 2001-05, Many of the 26 CASHE partners and

another 136 community organisations these NGO-MFIs work with, represent

the next level of emerging MFIs and some of these are already dealing with

ICICI Bank and ABN Amro.

In addition to the dominant SHG methodology, the portfolios of

Grameen replicators have also grown dramatically. The outreach of SHARE

Microfinance Limited, for instance, grew from 1,875 to 86,905 members

between 2000 and 2005 and its loan portfolio has grown from US$0.47

million to US$40 million.

Since banks face substantial priority sector targets and microfinance is

beginning to be recognized as a profitable opportunity (high risk adjusted

returns), a variety of partnership models between banks and MFIs have been

tested. All varieties of banks - domestic and international, national and

regional - have become involved, and ICICI Bank has been at the forefront

of some of the following innovations:

Lending wholesale loan funds.

Assessing and buying out microfinance debt (securitization).

Testing and rolling out specific retail products such as the Kissan

(Farmer) Credit Card.

Engaging microfinance institutions as agents, which are paid for loan

origination and recovery, with loans being held on the books of banks.

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Equity investments into newly emerging MFIs.

Banks and NGOs jointly promoting MFIs.

The 2005 national budget has further strengthened this policy

perspective and the Finance Minister Mr P. Chidambram announced

"Government intends to promote MFIs in a big way. The way forward, I

believe, is to identify MFIs, classify and rate such institutions, and empower

them to intermediate between the lending banks and the beneficiaries."

What is beginning to happen in microfinance can be seen from the

perspective of what has happened to phones in India. With the right enabling

environment, and intense competition amongst private sector players, mobile

phones in India expanded by 160% during just one year 2003-04 (from 13 to

33 million). Mobile tariffs fell by 74% during the same period. While this is

heady progress, there is a less heralded but even more powerful nationwide

success on access. In the late eighties, the phone infrastructure was the

monopoly of public sector institutions. Phones were difficult to get and even

more difficult to use for those lacking ownership. Realization that users need

not own a phone to access one led to privatization of the last mile - where a

phone user could interface with a private sector provider using the public

sector telecom infrastructure. Even with this policy change, today there are

2.5 million entrepreneurs selling local, national and international phone

services through the length and breadth of India. Many of these are now

graduating to sell internet services and could potentially be banking agents -

that is the evolving story.

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Savings services are needed by many more customers and as

frequently as access to phone services. Many poor households value access

to savings services and find new providers and arrangements, despite

hearing of unreliable savings collectors or even occasionally falling prey to

such arrangements. Many customers are rich, literate and lucky to have

banks working for them. But many others lack access to safe, secure and

accessible savings services for the short, medium and long terms. In the past,

many banks sent collectors to gather these savings but problems with

monitoring, inability to tackle misappropriation and the rising aspiration of

collectors to become permanent staff of public sector banks killed a useful

service. The central bank has strictly forbidden commercial banks from

using agents in collection of savings services. This is unfortunate as:

Effective microfinance delivery is about managing transaction costs

for providers and customers. A combination of agents and technology can

play a powerful role in rightly aligning incentives for the collector and

customers, while keeping transaction costs manageable for everyone.

The banks can only open so many branches, and fixed and operating

costs are high, apart from approvals still needed from the central bank to

open new branches or close existing ones. The appointment of agents can

keep costs manageable and offer greater flexibility to Banks.

Banking service may not be able to defy the commercial logic pursued

by most other sectors where a variety of retailers provide services to

customers, while companies focus on customer needs, product design,

quality control, branding, logistics and distribution.

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Fortunately, the 2005 Budget opened a small window in this area and

the central bank annual policy recently confirmed discussions on this: "As a

follow-up to the Budget proposals, modalities for allowing banks to adopt

the agency model by using the infrastructure of civil society organisations,

rural kiosks and village knowledge centers for providing credit support to

rural and farm sectors and appointment of micro-finance institutions (MFIs)

as banking correspondents are being worked out." But readers may note that

between the budget and the annual policy statement, "credit" has again crept

in as the key perceived need.

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THE INDIAN CONCEPT

In India microfinance is generally understood, but not clearly defined.

For instance, if an SHG gives a loan for an economic activity, it is seen as

microfinance. But, if a commercial bank gives a similar loan, it is not likely

to be treated as microfinance. In the Indian context there are some value

attributes of microfinance.

Microfinance is an activity undertaken by the alternate sector (NGOs).

Therefore, a loan given by a market intermediary to a small borrower is not

seen as microfinance. However, when an NGO gives a similar loan it is

treated as microfinance. It is assumed that microfinance is given with a

laudable intention and has institutional and non exploitative connotations.

Therefore, we define microfinance not by form but by the intent of the

lender.

Microfinance is something done predominantly for the poor. Banks

usually do not qualify to be MFOs because they do not predominantly cater

to the poor. However, there is ambivalence about the Regional Rural Banks

(RRBs) and the new Local Area Banks (LABs). In normal course one would

not ascribe the value attribute of an MFO to them.

Microfinance grows out of development roots. This can be termed as

the “alternative commercial sector”. MFOs classified under this head are

promoted by the alternative sector and target the poor. However, these

MFOs need not necessarily be “developmental” in the commercially. Here

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MFOs that are offshoots of NGOs and run commercially. There are

commercial MFOs promoted by the people who have developmental

credentials. We do not find commercial organisations having “microfinance

business”.

The reserve bank of India (RBI) has defined microfinance by

specifying criteria for exempting MFOs from its registration guidelines. This

definition is limited to non-profit companies and only two MFOs in India

qualify to be classified as microfinance companies.

Issue that trigger transformation

We examine the five significant issues that trigger the transformation of

NGOs into MFOs.

1. SIZE:-

The most significant issue that triggers a transformation is growth. This

affects the promoters as well as providers of microfinance. In organisation

like Mysore Resettlement and Development Agency (MYRADA) and South

Indian Federation of Fisherman Societies (SIFFS), which promoted credit

groups, banks were unwilling to provide loan at the same pace at which

microfinance customers needed them. It was nor easy for MYRADA or

SIFFS to deal with the attitudes of people meaning in this organisations. In

several instances it was an enthusiastic bank manager who made the

difference and this was not institutionalized. In such situation, NGOs tend to

get into action by opening a microfinance division or by setting up a separate

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MFO. The genesis of several Indian MFOs is rooted in the failure of banks

to meet the needs of the poor.

2. Diversity:-

Another trigger for transformation is the diverse financial services that

an MFO wants to offer. In most cases, NGOs start with credit but soon

realize the need to provide other support services. While MFO reduced their

own lending risks through group guarantees and addressed the issue of

willful default, they have not been able to grapple with the situation where

the underlying economic activity fails and the borrower faces a genuine

problem.

3. Sustainability:-

Sustainability is closely linked to growth. Beyond a certain level,

MFOs have to seek external funds for keeping the credit activity going.

When MFOs seek funds from financial institutions, issues like ownership

structure and capital adequacy become critical. For MFO to survive in long

run, it has to transform itself into as institution with transparent system and

accountability. In most of cases the promoters of MFOs do not have

sufficient capital to invest and, therefore, the main constraint is that they are

dealing with “other people’s money”. NGOs have to clear-cut ownership

structure, and making people liable under this format is a problem. The only

option they have in order to be sustainable is to deal with mainstream

institutions (Rhyne, 2000).

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4. Focus:-

NGOs need to maintain focus on their original mandate. Undertaking

microfinance is transaction intensive and requires distinct orientation and

skills. For NGOs there is always a conflict between microfinance, which

earns returns and, therefore, “commercial” and other activities that are

“developmental”. This is the reason why NGOs spin off their own

microfinance activities. The entity that emerges to carry out microfinance

should be understood by the mainstream and, therefore, it should have an

appropriate institutional form.

5. Taxation:-

When an NGO carries out commercial activities (microfinance) on a

large scale, it is liable to lose its “tax free” status and is likely to jeopardize

its other activities. Even grants may become taxable. This is a major concern

for NGO-MFOs. This also triggers a search for an alternative source, where

microfinance could be kept isolated.

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SELF HELP GROUP (SHG):

SHG is unregistered group of less than twenty people (any structure of

more than twenty has to be registered) from a homogeneous class who come

together for addressing their common economic problems. They are

encouraged to make voluntary savings on a regular basis. They use this

savings to make interest-bearing loans to their members. This process i.e.

saving, lending and recovering it back imbibes the essentials of financial

intermediation including prioritization of needs, setting terms and conditions

and keeping financial accounts. This helps in building financial discipline

and more impotently credit history for themselves, as the money involved in

landings is their own ‘warm money’, the lending is done very carefully and

the entire money is recovered [zero tolerance default].

The group members also learn to handle larger suns of money which

are much beyond their individual savings. This process also makes them to

understand the basic principle of banking that money has a time value and is

a scare resource. The groups which learn this basic proves of savings,

lending and recovering it back, are ready to be linked to the bank. Linking

means access to larger resources as well as the security of their saving when

they have surplus. The banks take the advantage of lending to the group and

the group rakes the responsibility of prioritizing the loan demands from the

members and fixing the terms and conditions of sanction. In other words, the

banks get the advantage of lending to those who have experience in

borrowing and repaying and additionally major part of their costs of

sanctioning, disbursing, monitoring and recovering are externalized. The

bank’s loan amount adds to the small savings which the group had

accumulated and thereby the availability of resources increases. The banks

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are able to lend at the normal commercial rate of interest; there are no

subsidies and the money comes back. The peer pressure among the group of

members ensures timely repayment as the group’s own accumulated savings

are part and parcel of the aggregate loans made by the group to their

members and there are other members waiting as to when their demands

loan would be prioritized by the SHG. The conventional collateral is

substituted by more effective collateral [the peer pressure].

The crucial judgment of the banker is to assess when the SHG is ready

for receiving bank loan and how much should be sanctioned. In the Pilot

Project (1992), NABARD had suggested that the bank loan should be in

multiple of the accumulated thrift of the SHG. The idea was not to exceed

1:4 and the suggestion was to start slowly by 1:1 or 1:2 and gradually

increase. It was also suggested that the credit linkage was not to be done

before six months of the members of the SHG doing regular thrift and the

money so collected was used for lending among them and recovered. Many,

particularly the non-bankers were unhappy with the ‘waiting period’ of six

months. Fortunately, NABARD and the banks stuck to it and ensured that

only mature SHGs were credit linked.

The important features of the product developed under the SHG-Bank

linkage Programme are as under:

Groups of homogeneous people from similar economic background

living in the neighborhood.

Focus on woman.

Saving first, credit later. Small fixed saving at regular interval. It helps

in building up financial discipline.

Shorter repayment period.

Progress lending.

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No subsidies.

The SHG deciding the quantum as also the terms as conditions for

loans to members.

No subsidization of interest.

The linkages were in the two main areas:-

(1) Institution – linkage between the SHG and the Banks, directly or

through the NGO or other self-help group promoting institutional

(SHGPI).

(2) Financial linkage between savings and credit (discussed earlier).

SHG Model

The strategy involved in this model is that of forming small, cohesive

and participative group of the poor, encouraging them to pool their savings

regularly and using the pooled savings to make small interest-bearing loans

to members and, in the process, learning the nuances of financial discipline.

Subsequently, bank credit also becomes available to the group to augment its

resources for the purpose of lending to its members. The SHG-bank linkage

program has proved to be the major supplementary credit delivery system

with a wide acceptance by banks, NGOs and various government

departments. There are three models of SHG-bank linkages that have

evolved over time, especially in India.

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Model 1: SHGs Formed and Financed by Bank:

In this model, the bank itself takes up the work of forming and

nurturing the groups, opening their bank accounts and providing them with

bank loans after satisfying itself regarding their maturity to absorb credit.

Here, the bank acts as the Self-help Group Promoting Institution (SHGPI).

Model 2: SHGs Formed by NGOs and Formal Organisations, but Directly

Financed by the Banks:

In this model, groups are formed by NGOs (in most cases) or by

government agencies like Velugu project in AP. The groups are nurtured and

trained by the agencies. The bank then provides credit directly to the SHGs

after observing their operations and maturity absorb credit. While the bank

provides loans to the groups directly, the facilitating agencies continue their

interaction with the SHGs. The model has also been popular with and more

acceptable to banks, especially in India, as most of the difficult functions of

social dynamics are taken care of either by NGOs or government agencies.

Around 75% of the total numbers of SHGs are financed under this model.

Model 3: SHGs Financed by Banks Using NGOs and Other Agencies as

Financial Intermediaries:

For various reasons, banks in some areas are not in a position even to

finance SHGs promoted and nurtured by other agencies. In such cases, the

NGOs act as both facilitators and microfinance intermediaries. First, they

promote the groups, nurture and train them and then they approach banks for

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bulk loans for on-lending to SHGs. Of late, this model is becoming more

popular with private sector banks in India as they are in a position to partly

fulfill their social lending obligation by giving bulk loans to intermediaries

(like NGO/MFI) for their onward lending to weaker sections.

Where the SHGPI was a NGO, the promoting institution also took

upon itself the role of keeping an eye on the SHG, providing technical

support in the matters of account keeping, holding of meetings, elections and

training etc. besides the NGOs, the banks also started promoting the SHGs.

In certain areas, the Panchayat Raj institutions or certain governmental

organizations have also promoted SHGs.

27


VARIOUS PLAYERS PROVIDING MICROFINANCE

The microcredit, which has its roots in 1970s, lost its momentum for a

while. It achieved great deal in its progress by delivering financial services

to the people of urban and nearby areas. But, it failed to reach the populated

rural areas. Its other goal, i.e., eliminating the traditional moneylenders from

the business has been achieved partly.

There are four major categories of microfinance-providers, who are

engaged in the microfinance movement to achieve its goals. They are:

1. Informal Financial Service-Providers:-

This category includes pawn-brokers, money lenders, ROSCAs,

ACSAs savings collections, supply shops and money guards. These are very

flexible and easy to access. But these services are costly and are in limited

variety. There are high risks of losing money.

2. Member-owned Organizations:-

This category includes Self-Help Groups (SHGs), financial

cooperatives and a variety of hybrid organizations like Financial Service

Associations (FSA) and Self-managed Village Savings and Credit

Associations (SVSCAs). Generally, theses are small, situated in local areas

and have access to each other’s financial circumstances. Hence, these groups

offer convenient and flexible services. They have low cost of operations and

are managed by the poor. Simultaneously due to lack of awareness about

financial services, poor are getting into trouble when they are in need of

28


money to perform their daily activities. Hence, these member-owned

organizations are playing vital role in the lives of poor.

3. NGOs:-

They play significant role in lending microfinance. They began their

operations by promoting financial services to the poor and low-income

households in rural areas of the developing countries. Recently, the RBI has

permitted NGOs to merge with microfinance activities for the promotion of

the External Commercial Borrowing (ECB) up to $5mn. Of late, the SIDBI

has provided a need-based financial support to poor and assembled efficient

and well-performing NGOs and microfinance institution in Orissa.

4. Formal Financial Institutions:-

This category consists of commercial Banks, state-owned banks,

agricultural development banks, savings banks and NBFCs, which are well-

regulated and supervised. They have branch network spread over nationally

and internationally which offers a wide range of products. But, they have an

expensive operation framework which enables them to serve the poor or

remote population.

So, to solve the microfinance problems, these institutions can bridge

leverage through appropriate regulation and supervision. It helps the

microfinance movement to achieve its goals rather quickly and effectively.

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5. NABARD:-

NABARD should promote and ensure a rapid growth of microfinance

sector in terms of formulating policies for good governance and

transparency, supervising with benchmarks, facilitating the maturity in

credit-rating norms and maintaining specific accounting and auditing norms,

etc.

Various thrift services that are offered by every MFI should obtain a

certificate of registration from NABARD and those who do not offer thrift

services are required to file their returns with Nabard. There are some

limitations which require certification from Nabard if the MFIs are ready to

accept the confines such as the general character of the management is not

prejudicial to the interest of eligible clients; the act owned funds of the MFI

is at least Rs. 5 Lakhs; the MFI has been in existence for at least three years

etc. NABARD possesses the authority to revoke the registration, if an MFI

which ceases the thrift services or fails to comply with any of the conditions

on which the registration is granted or any direction issued by NABARD or

does not tender account books or other documents for inspection. If an MFI

disobey any prescribed provision, NABARD may also forbid such MFI from

accepting thrift services. Every MFI has to generate a reserve fund by

allocating a minimum of 15% of its net profit or surplus realized out of

saving services and microfinance services. This fund will be invested in

some specified securities suggested by Nabard.

NBFCs play a vital role in distributing and using microfinance in

India. Microfinance is offered through two channels, i.e., SHG Bank

Linkage and MFIs. About 70% of the loans distributed in the rural areas in

30


India are through MFI channels. Few other important recommendations are

pertaining to MFIs such as reducing the foreign equity requirement to $1

lakh from $5 lakh, transferring the regulation of NBFC MFIs over to

NABARD and also to furnishing tax concessions of 40% of their profits if

they work in exclusive districts as identified by NABARD.

The uniqueness of SGHs is to empower the poor to enable and control

the direction on own development by categorizing their felt needs. These

SGHs add a very significant dimension to microfinance. In 1992, NABARD

gave stimulus to the movement by starting the SHG Bank linkage program.

It was the first major effort to link the conventional financial institutions

with the informal groups.

6. Microfinance in banks:-

Traditionally, banks incurred substantial cost in managing the client’s

accounts. This is true irrespective of sum of money involved. Generally,

poor people possess small amount of money. If banks decide to serve these

people, their break-even points in loans and deposits will be affected

seriously and they have to incur loss. But, with economic growth in rural

areas through microfinance, banks are developing an interest in

microfinance. In the case of ICICI bank, there has been a huge development

in rural microfinance and agri-business loans within 9 months time and there

is growth in financial turnover with an average of Rs. 5,200 cr to Rs. 10,000

cr. Microfinance shows its impact on the bank’s growth, customer

relationship and accumulates 3.2 million low-income customers. India’s

largest international bank, Standard Chartered Bank is planning to involve in

microfinance to increase the Bank’s turnover from Rs. 100 cr to Rs. 500 cr.

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The ABN Amro Bank believes that microfinance is a powerful tool for

addressing poverty, empower the socially-marginalized poor and strengthen

the social fabric.

32


THE CASE OF ICICI BANK

India's second largest commercial bank, the ICICI Bank, was quick to

recognize the microfinance market as a profitable investment, and eagerly

seized the opportunity to expand its business while improving the lives of

poor people. It utilized two business models to expand its presence in India,

viz., the bank-led model and the partnership model. The article discusses

these unique models which helped the ICICI Bank extend credit directly to

India's rural areas without investing much in initial developmental costs.

Since the concept was born in Bangladesh almost three decades ago,

microfinance has proved its value, in many countries, as a weapon against

poverty and hunger. It really can change people's lives for the better,

especially the lives of those who need it most.

- Kofi A Annan, the UN Secretary General (Retired)

ICICI Bank, one of the largest private sector banks in India, ventured

into microfinance in 2001, and within a short span of time, it achieved

remarkable progress. The microfinance portfolio of the Bank grew from $16

mn to $6 mn (the average loan is $223) from 2001 to 2003. Adopting the

partnership model, it extended credit facilities directly to rural masses.

Information irregularity, inability of poor people to offer collaterals and lack

of details of credit history were the major challenges it faced. Apart from

providing credit to rural people, it planned to develop various financial

products like weather insurance, health insurance, remittance services and

commodity derivatives. Despite these developments, the question that

33


remains is whether the ICICI Bank will be able to sustain its success in the

Indian microfinance sector as more and more entities have begun to jostle

for a share in the burgeoning sector.

Historically, in India, credit given to the poor was viewed as a

government program which required large amounts of subsidy. The

nationalization of banks initiated by the late Primer Minister Indira Gandhi

in 1969 compelled commercial banks to open branches in rural areas. As a

result, the share of banks in rural household debt increased to 29% in 1981.

In spite of such developments, there was only a little progress towards

providing the rural poor with access to formal credit as rural banks served

rich rural borrowers who had access to bank accounts.

In 1978, Integrated Rural Development Program (IRDP) was launched to

alleviate India's rural poverty. The main objective of the program was to

provide loans to needy rural households. A government evaluation, later in

1989, revealed that only a mere 28% of people assisted under IRDP crossed

the poverty line, compared to 33% supported by private sector programs.

Bureaucratic delivery systems with high transaction cost, unsuitable

financial products for the poor and inefficient coordination of the program

were the major factors responsible for poor performance of the government-

assisted project.

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During 1990s, following the liberalization of the Indian economy, the

financial and banking system witnessed major structural changes and

adjustments. The partial deregulation increased competition and led to the

development of a new approach to microfinance. In 2002, the average

population served per commercial bank branch stood at 15,000, reflecting

the deep root of the Indian financial system. Compared to other developing

countries, India showed a strong outreach in terms of active borrowers per

microfinance institution during 2005-2006.

In India, organizations involved in microfinance can be divided into

`Mainstream' and `Alternative' Microfinance institutions. The former include

National Bank for Agriculture and Rural Development (NABARD), Small

Industrial Development Bank of India (SIDBI), Housing Development

Finance Corporation (HDFC), commercial banks, Regional Rural Banks

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(RRBs), and the credit cooperatives. On the other hand, the latter exist to fill

the gap between demand and supply for microfinance. They comprise Non-

Government Organizations (NGOs) (which mainly focused on promoting

Self-Help Groups (SHGs) and linking them with banks), cooperatives and

non-banking finance companies.

But, the Indian microfinance sector witnessed strong links with

informal local groups known as SHGs (promoted by NGOs); the term used

for unregistered groups of 10 to 20 members involved primarily in saving

and credit activities. The participating members save periodically in the

group and these savings are lent out to the members who require loans at a

fixed rate of interest. According to the industry experts, SHG-Bank Linkage

is set to become India's dominant system of mass-outreach banking system

for poor. Since 1990s, nearly 700,000 SHGs obtained more than Rs. 20 bn

($425 mn) as loans from banks.

The SHG-Bank Linkage Program, developed and managed by

NABARD, was started in 1992 as a pilot project and was upgraded to a

regular banking program in 1996. Experts opined that lower interest rates

and high-level of liquidity with banks made the SHG-Bank Linkage program

profitable for the banks. Besides, Nabard also created `Microfinance

Development Fund' contributed by the Reserve Bank of India, which

expanded and attracted more banks to the microfinance sector.

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ICICI Bank: Doorway to Microfinance:-

The ICICI Bank was promoted in 1994 as a wholly-owned subsidiary

of ICICI limited (a development financial institution for providing medium-

and long-term project financing to Indian businesses). In 2002, after the

consideration of various corporate structuring alternatives, the ICICI Limited

and ICICI Bank were merged to create leadership position in Indian

financial sector. It offered a wide range of commercial banking products and

services to retail and corporate customers through a network of more than

950 branches and 3,300 ATMs in India and presence in 17 countries. At the

end of March 2007, its total asset base was Rs. 3,446.58 bn ($79 bn).

The ICICI Bank witnessed untapped opportunities in rural markets as 41%

of adult population did not have access to formal banking facilities.

According to Nachiket Mor, Deputy Managing Director of the ICICI Bank,

"The informal credit segment is about $82 bn." Instead of conventional

branch banking model, the ICICI Bank adopted a different strategy to foray

into rural markets in the country. In December 2000, it merged with Bank of

Madura (BoM). BoM had a substantial network of 77 branches in the rural

areas of Tamil Nadu. The BoM developed a model and became an expert in

catering to the needs of the small and medium sector with well-developed

network of 1,200 SHGs. After the merger, the ICICI Bank started working

on BoM model combining intermediary forms of organization to capitalize

their strengths in rural markets.

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Partnership Model:-

To ensure profitability, it adopted a three-tier business model to reach

the rural poor by offering them microfinance products and services.

Establishment of hierarchical structure ensured scalability of the operation.

The top positions were retained by the employees of the bank. The

coordinator (usually an SHG) was asked to report to the project manager and

supervise a group of 20 people for 12 months, upon which promoter would

receive financial compensation from the bank.

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For the implementation of the program, the ICICI Bank partnered

with selected NGOs on a long-term basis. The NGOs, with their past

experience in implementation of project, assisted the ICICI Bank to develop

field organization for the promotion and management of SHGs. The ICICI

Bank provided credit, savings and other services directly to the SHGs, apart

from providing working capital assistance to the NGOs to meet the cost of

promotion for the program.

With the implementation of such initiative, the microfinance portfolio

of ICICI Bank grew at an impressive pace. The ICICI bank reached 8,000

SHGs in 2003 from just 1,000 SHGs in 2001, showing a high rate of growth

in its operation. The expertise of BoM helped the Bank to extend its

products and services to more SHGs. The outstanding portfolio increased to

Rs. 9.98 bn ($ 227 mn) from a level of Rs. 0.20 bn ($4.5 mn).

Towards Commercialization:-

According to Nachiket Mor, "Providing enough finance does not

always mean good economics, which demands that a poor farmer becomes

capable of articulating his financial needs. Financial needs arise out of

economic activities that are sustainable. For this, the poor need not only

capital, but also real services. We are in constant dialogue with the central

banking authority to improve financial inclusion. The recent business

correspondent rules—that are a perfect fit to our strategy—sell more than a

1,000 savings accounts each day."

39


The ICICI Bank developed market-based approach whereby it

targeted the extremely poor by providing them access to basic financial

services. To provide basic financial services, it emphasized on the

participation of mainstream organizations to facilitate community-based

institutions. It initiated development of community-based financial

institutions. The Bank developed network organizations which could

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establish link between rural poor and large markets. These efforts helped

them to attain minimum level of subsistence.

The ICICI Bank entered into a partnership with SHARE Microfinance

Ltd. (SML), a microfinance institution, operating in rural areas of Andhra

Pradesh, to securitize microfinance portfolios. The US-based Grameen

Foundation supplied collateral deposit of $325,000 for technical assistance.

As per the agreement, the ICICI Bank purchased a part of SHARE's

microfinance portfolio against consideration of $4.9 mn at Net Present Value

(NPV) of receivables at an agreed discount rate. The interest payment was

4% less than that of commercial banks.

SHARE provided credit provision in the form of guarantee amounting

to 8% of the receivables under the portfolio as a fixed deposit. This

arrangement helped SHARE to increase its lending. The ICICI Bank gained

in terms of reaching to new markets and by trading high quality assets in

capital markets to hedge its own risk. Janet MacKinley, Vice Chairperson of

Grameen Foundation, said, "I believe it will encourage more of these types

of transactions that can play a strategic role in making microfinance more

widely available to the world's poorest communities."

The ICICI Bank started encouraging venture capitalists to scale up

equity needs of the microfinance sector. Venture capitalists like Lok Capital

and Aavishkar had shown their interest to identify and mentor entrepreneurs.

The Bank entered into an agreement with these venture capitalists to provide

financing to microfinance institutions and buy out the venture after a period

of three to five years, once the operational sustainability was achieved. Apart

41


from these initiatives, the Bank established the Center for Microfinance

Research (CMFR) at the Institute for Financial Management Research

(IFMR) in Chennai. It aimed at conducting research, research-based

advocacy, training and strategy building activities in the field of

microfinance.

Future Ahead

Apart from regulatory issues, information irregularity was the biggest

challenge faced by the ICICI Bank. Also, the inability of the poor people to

offer collateral, details of their credit history and difficulty in evaluating the

success potential of the enterprise were major concerns. The high cost of

intermediation with low use of technology and high supervision cost

necessitated the Bank to implement innovative strategies. For instance, it

established 200 rural branches, 1,500 credit access points and 5,000 kiosks.

Apart from these, it has planned to expand its presence in more than 450

rural districts by 2008.

The ICICI Bank has planned to offer weather insurance, health

insurance, remittance services and commodity derivatives services to make

its presence felt by providing a wide range of financial services to the rural

masses. Under weather insurance, it will launch index-based rainfall

insurance product which compensates the farmer for loss in yield due to

deficient rainfall.

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For remittance services, it plans to establish fund transfer facility

between urban centers and villages, especially to cater to the migrant

population. By developing commodity derivatives, it will ensure price

discovery and hedging against price risks by small farmers by participating

in commodity exchanges with NGO and MFIs.

According to industry experts, commercial banks need to evaluate the

sustainability of the SHGs as financial intermediaries and develop external

appraisal system.

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CHALLENGES FOR MICROFINANCE

Expanding access of the poor and near-poor to sustainable

microfinance is the greatest challenge facing the microfinance industry.

Many microfinance stakeholders see provision of commercial microfinance

as the way to achieve this goal. However, several challenges to microfinance

commercialization exist at the micro (institutional) and macro (operational

environment) levels. Below are a few of the most pressing challenges:

Internal Constraints:-

The most pervasive internal constraints to commercial microfinance is

the perception problem. Because the microfinance market is not

monopolized by microfinance NGOs, a big internal challenge faced by

potential players in the market (e.g., rural banks and cooperatives) is the lack

of appreciation of the viability and sustainability of microfinance as a market

niche. Both the rural banks and the credit cooperatives have long been in

operation but have only been recently engaged in the microfinance business.

The perception problem, however, is partially based on the lack of ability or

flexibility of the existing systems of rural banks and cooperatives to

accommodate the unique features of microfinance technologies.

Most other internal constraints faced by existing MFIs and potential new

entrants have significant differences according to institutional type. The

internal constraints in rural banks, cooperatives, and microfinance NGOs are

examined below.

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1. Rural Banks:-

Rural banks are ideally suited to the provision of commercial

microfinance in that they are formal financial intermediaries run on a for-

profit basis and have a wide client base over which to diversify risk. Rural

banks are managed on a continuing basis with the same staff. This helps to

keep information costs low when selecting micro- and small-scale borrowers

and helps to build trust and confidence among clients who want to deposit

small savings. These relations between customers and the bank,

characterized by mutual trust, also attract some clients who could deposit

with commercial banks.

Access to support services is also a constraint. The development of

new microfinance products and services, the training of staff, and the

enforcement of effective auditing and control mechanisms are expensive.

The costs involved are too high for a single rural bank.

2. Cooperatives:-

Unlike rural banks, cooperatives are considered semiformal

institutions; they are regulated and supervised by the CDA but this

supervision is known to be weak. Lack of transparency has historically been

a major difficulty in assessing cooperative performance.

Cooperatives, like the rural banks, suffer from a lack of an effective

network. Access by cooperatives to support services also remains weak.

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3. Microfinance NGOs:-

With the growing scarcity of donor funds for microfinance on lending,

most microfinance NGOs are now faced with the challenge of finding funds

from commercial sources or from deposits of their member-clients. Because

deposits are considered a cheaper source of funds than commercial loans, the

inability of NGOs to mobilize deposits legally poses a significant internal

challenge. Lack of legal identity stemming from weak ownership and

governance structures poses the greatest challenge to microfinance NGOs in

accessing funds to provide microfinance on a commercial basis.

Commitment to balancing social and commercial objectives is also an

important internal challenge faced by most microfinance NGOs. Most

microfinance NGOs, therefore, remain small and weak and dependent on

fresh infusions of subsidized funds for their survival. Related to constraints

stemming from small size and weak capacity, many microfinance NGOs

face the constraint of poor access to appropriate systems and support

services.

Moreover inadequate management information systems and the lack

of capacity to undertake market research as two major constraints curtailing

their growth. Although computerization of systems has been identified as

essential to the growth of MFIs, there still appears to be a supply problem in

terms of affordable, commercially available, off-the-shelf software packages

that suit the system and information requirements of MFIs.

Market research is a relatively new concern for most MFIs, prompted

by increased client exit (heightened drop-out rates) and the desire to improve

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repayment performance. Given the strong recent interest in undertaking

market research, the need to build this capacity in MFIs is great, especially

in microfinance NGOs, which face limited funding to support their increased

lending.

CONSTRAINTS IN THE OPERATING ENVIRONMENT

1. Threat of Policy Reversal:-

The very convenient nature of direct credit provision by government

makes it politically expedient and tempting for policymakers to revert to the

previous policy of regulating interest rates and supporting directed credit

programs. The challenge to prevent this lies not only with the Government

but also with private sector MFIs. It is imperative for all types of MFIs to

close ranks and advocate actively that the Government continue moving

away from outright credit provision and focus its interventions where it has

distinct comparative advantage.

2. Unclear Regulation and Supervision Concerning Microfinance

Operations:-

Significant improvements have been made in the last few years by the

Government in recognizing microfinance and adapting regulation and

supervision to the specialized nature of microfinance operations. Until the

rules of engagement of formal financial institutions in microfinance are

complete, uncertainties regarding the final form of regulation and

supervision of microfinance-oriented banks may curtail efforts by formal

institutions to downscale their operations.

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3. Inadequate Access to Commercial Sources of Funds:-

One of the consequences of not being able to mobilize deposits

overtly is that many microfinance NGOs remain highly dependent on

external funding, which has historically come from donors.

4. No Credit Information Bureau that Captures Microcredit Information:

With increasing microcredit provision by microfinance NGOs, rural

banks, and cooperatives, creation of a credit bureau that captures microcredit

information from these actors is becoming increasingly vital to the continued

health of the industry.

5. Lack of Microfinance Training Centers:-

There is a variety of microfinance training programs. However, no

“one-stop shop” yet exists for the provision of regularly scheduled, demand-

driven, and affordable technical courses on microfinance program

management and operation. CARD’s microfinance training center is perhaps

the best known and most widely used, but it cannot be considered as a

wholly professional training institution that would attract a wide variety of

regular students from different types of MFIs. The institution that seems

most suitable for offering additional microfinance training on a regular basis

is Punla, provided that its management focuses on developing demand-

driven courses suitable for a wide range of viable MFIs. To serve as the one-

stop shop to build the technical capacity that the industry needs for further

professionalization and commercialization, Punla will need to shift its focus

more toward serving the complex and varied needs of commercial

microfinance providers.

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FINDINGS

To go through this project:-

Masses in the country are unaware on has very little knowledge about

Microfinance.

People hardly know the difference between microfinance and

microcredit.

People are not taking the help of microfinance institution in over to

get finance.

Effort made by government to increase the awareness about the

microfinance is appreciable but along with government all the NGOs,

corporate should assist in spreading the information about

Microfinance from grass route level.

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FUTURE OF MICROFINANCE

It has been clear for many years now that microfinance is becoming

increasingly integrated in the much broader world of mainstream markets

and financial systems. The aim for the future is the development of deep

domestic financial markets with sound and healthy financial institutions that

serve the majority of the poor population. Future sources of funds will be

mainly domestic savings, and the role of financial intermediaries is to

provide critically important deposit services, recycling these savings into

productive loans for the poor.

Recently the external NGOs having allowed to avail External

Commercial Borrowings (ECBs) route the mobilizing their recourses.

Several foreign institutional and donor agencies are showing interest in

lending money to MFI in India

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CONCLUSION

India is land of villages. According to the father of the nation,

Mahatma Gandhi, India can globally be visible only when its rural sectors

shine. He was the one to propagate the village and cottage sector so that

rural economy can grow and become prosperous. But, all this is only on

paper. Now the time come to restrict the entry of microfinance into urban

sector to promote rural marks and provide better, speedy and affordable

financing schemes. Infotech application in microfinance is laudable and with

emerging computer and communication technologies, it can be made as

simple tool for rural folks to adopt and availed the finance for the proposed

project to make the rural economy a dream. So the rural economy can

definitely contribute to the growth the of national economy with the

adoption of mixing infotech with microfinance

Microfinance has come a long way despite doubts expressed and

criticism launched about its viability, impact, and poverty fighting capacity.

The pioneers in the field and the practioners at large with their commitment,

determination, and innovations have not only demonstrated its power and

success, but also accelerated its growth. The task of building a poverty-free

world is yet to be finished. There are still over 1.2 billion people living in

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extreme poverty on this planet. They are not living in one country or region

but spread all over the world.

Fortunately, there is an increasing awareness about the power of

microfinance, and the need to support its growth. Many players have

committed themselves to its promotion. Governments are taking an

increasing interest in it. More banks, both national and international are

coming forward with different support packages. NGO-MFI partnerships are

on the increase. New instruments are being used to solve the problem of

funding. It is expected that in the coming years more ideas, innovations, cost

saving devices, and players will continue to reinforce the microfinance

movement and increase its expansion.

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Micro Finance

Documents

Transcript of Micro Finance