MICRO FINANCE

PRESENTED BY

R.KUMARAVENKATESAN

ADVOCATE PATENTS DEPARTMENT ALTACIT GLOBAL

PRESENTATION

FINANCE A branch of economics concerned with

resource allocation, resource management, as well as acquisition and investment.

Deals with matters related to money and the markets.

The management of money, banking, investments, and creditclassified ob the basis of quantum, period, field, beneficiaries, rural/urban etc.

INTRODUCTION

Microfinance providers are “banks for poor”.• A type of banking service • different from the traditional banking system• the goal: to give low income people an opportunity to

become self-sufficient by providing• a means of saving money, borrowing money and

insurance.• Loans provided to unemployed or low-income

individuals or groups who would otherwise have no other means of gaining financial services

MICROFINANCE

MICROFINANCE

Includes,• deposits, loans, payment services, money

transfers and insurance, products, savings and credit services

• Types: Urban microfinance and rural microfinance

• Beneficiaries: microenterprises, poor, women, low-income households

• Act: The micro finance institutions (development and regulation) bill, 2011-

CORE PRINCIPLES FOR MICROFINANCE

• The poor needs access to financial services• The poor has the capability to repay loans and

generate savings • an effective tool for poverty alleviation • to provide financial services to an increasing

number of disadvantaged people • greater reach and sustainable development

• to raise their income levels and improve their living standards.

• women, to start or expand very small, self-

sufficient businesses.

• tool to fight against poverty, • The transparency of financial activities

CORE PRINCIPLES FOR MICROFINANCE

• On the basis of legal status

• Formal Microfinance Institutions – rural/village banks, commercial banks, telecom firms, and cooperatives

• Semi-formal Microfinance Institutions – nongovernmental organizations providing micro-sized loans

• Informal Microfinance Sources – money lenders and shopkeepers

MICROFINANCE INSTITUTIONS

• risk of lending to the poor (the loan may be misused easily)

• high costs involved in small loan transactions

• lack of awareness about sources • the poor’s inability to offer marketable

collateral for loans • difficulty in measuring the social

performance of MFIs

PROBLEMS FACED BY MICROFINANCE

• Continued…..• mixing of charity with business by microfinance

providers • high interest rates of loans made to the poor • lack of customized microfinance models for the poor • inappropriate targeting of poor • lack of microfinance training for MFIs • poor distribution system to spread out loan facilities

into rural areas • dual mission of MFIs to be financially sustainable as well

as development oriented

PROBLEMS FACED BY MICROFINANCE

• increased self-employment opportunities especially for women (Women are granted 75% of microcredits)

• micro entrepreneurs development : Small shopkeepers, peddlers, craftsmen or farmers.

• acquired the know-how • to generate a regular income.

ADVANTAGES

• started in the early 1980s with self-help groups• Small Industries Development Bank of India

(SIDBI) • National Bank for Agriculture and Rural

Development (NABARD) • Grameen Financial Services Pvt Ltd, Share

Microfin Limited,• Shri Kshetra Dharmasthala Rural Development

Project,• Grama Vidiyal Micro Finance Pvt Ltd,SKS

Microfinance Ltd•

MICROFINANCE IN INDIA

THANK YOU