Micro-Finance for Inclusive Development

8/8/2019 Micro-Finance for Inclusive Development

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1.2 billion people in the world live on less than $1.20 per day,including 900 million women

Another billion people live below the poverty line of $2.40 per day

80% world's population has no access to credit.

500-600 million can, thanks to a microloan, develop an income-generating activity

More than 80 million have benefited from services provided by themore than 10,000 existing MFIs

Total financing currently available for microfinance has risen to US$1billion per year

Only 3% of the need for microfinance is being met 16 million currently use microfinance

500 million could potentially benefit from microfinance


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Microfinance is the provision of financial services to low-income

clients, including consumers and the self-employed, who

traditionally lack access to banking and related services.

More broadly, it is a movement whose object is "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."


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Channels ofDistribution

Self HelpGroups

MicroFinance

Institutions

4 out of 5 microfinance clients in India are

women.

Micro-credit portfolio of India Microfinance

was Rs. 22,000 crore

SHG Linkage reports over Rs. 3,500 crore

savings, only MFI Bank, KBS Bank reports

about Rs. 40 crore savingsPortfolio

MFIs operate in 209 out of 331 districts of

the country, 28% of the new clients are from

Urban areas.

SHG75%

LargeMFIs

20%

Medium& Small

MFIs5%

0%


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People helped

Active borrowers: 604,000

Jobs created or sustained last year: 985,000

Typical borrower: woman (68%)

Children impacted last year: 1.86 million

Loans given

Average loan size: $671.00

Loan repayment rate: 98.7 percent

Loan portfolio: $397 million

Since 1993, World Vision has disbursed 3,500,000 loans, totaling more

than $1.8 billion


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UnutilisedIndustrial

Land

Allottedfor

Cultivationpurposes

Earn aliving

throughagriculture

IncreaseGDP fromprimarysector


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Personallevel

Social

LevelRegionalLevel

Personal Level

Empowerment of women

Better education and development

Ability to cope with economic shocks

Social Level

Creation of jobs

Higher quality of jobs Higher and more stable income

cohesiveness of a community

improving the economic base and

resilience

Regional Level Creation of jobs at the regional level

Strengthening of the microentreprise sector

Reduce migration flows to urban areas

Strengthening of the financial sector as a

whole, widening its scope and outreach


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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.

Customer KYC is tough for MFIs as most prospective customers

do not have permanent habitats, bank accounts, stable incomeproof etc.

Illiteracy, bad decision making and lack of business processes.

Combination of above, lead to high operating cost


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Mr Reddy says for-profit MFIs should be

treated at par with money-lenders and

should not be subject to soft regulation

as they are a bigger risk to the system

than individual lenders who extend loansout of their own net worth.

The money lender normally lends outof his own money whereas here, MFIsare actually borrowing money fromdepositors and lending the money. So

essentially, he is a leveraged moneylender.

Therefore there should be good moneylending legislation in every state

Yaga Venugopal Reddy


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1.Existing microfinance institutions can expand their operations to areaswhere there are no microfinance programs.

2.Cooperatives/Credit Unions involvement can play a more proactive role.

3. More NGOs can incorporate microfinance as one of their programs.

4. In places where there are no microfinance institutions, the government

channels at the grassroots level may be used to serve the poor withmicrofinance.

5.Postal savings banks may participate

6. More commercial banks may participate both in microfinance wholesale

and retailing.

7.International NGOs and agencies may develop areas or countries wheremicrofinancing is not a very familiar concept in reducing poverty.

8.Community based organizations may get involved in microfinance Services.

9. Industrialisation can compliment Agriculture, enhance quality of Life at

grass root.

10.Penetration of Banking and accountability


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Private Investors and equity funds are now financing fastgrowing and nascent MFIs

Some state governments are funding SHG-programmes

Govt. of India has appointed NABARD to manage theMicrofinance Development & Equity Fund (MFDEF)

Microfinance Bill pending in Parliament

Banks are leveraging technology to reach out to the Poorand demographically underprivileged.


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Akanksha Sharma-58

Basant Jalan-30

Nitin Sarawagi-53

Pankaj Sharma-57

Samarth Dhawan-11

Vatsal Jariwala-31

Micro-Finance for Inclusive Development

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