1. Presentation on
Micro Finance
Micro Finance,
Macro Impact
Presented by:
Sushil Chokhandre
Sushil.chokhandre@yahoo.com
Updated on : Feb 2014
Sushil Chokhandre

2. Micro finance
Provision of financial services such as
savings,
credit &
insurance
to unemployed or low-income individuals or groups which
fall below the poverty line
Sushil Chokhandre

3. Current Scenario – Indian Market
•
India's GDP growth is expected to slow to an 11-year
low of less than 5% in the fiscal year ending March.
•
35-37% population below poverty level.
•
450 million unbanked people in India who live in rural
areas
•
87% of the rural households do not have access to
credit.
•
Estimated credit demand: USD 14 bn
•
Demand met so far: USD 700mn
•
Next 3-5 years, around 65% of the rural population will
have access to MFIs.
Sushil Chokhandre

4. Current Micro-Finance industry
ICRA report:
•
The market potential:Rs.1.4-Rs 2.5 lakh crore.
•
Current size of the microfinance market:
Rs.60,000crore.
•
The loan requirements are huge in rural areas but
MFIs are extending only small-value loans.
•
a typical loan size is Rs. 10,000 and many borrow
from two MFIs which is lower than the Rs. 35,00045,000 loans that many households are
demanding.
•
Growth: at 30-35 per cent a year over the next
three years.
Sushil Chokhandre

5. Current Scenario – Micro-finance Industry
•
The delinquency rate of Microfinance Institutions
(MFIs) has declined by 20% between April and
October 2013.
•
Microfinance institutions lending close to Rs.30,000
cr in current fiscal, 30% increase in qtr ended Oct13 & Growth is expected to increase by 40 per cent
next fiscal.
•
The aggregate gross loan portfolio of microfinance
institutions (MFIs) grew by 54 per cent in the
second quarter ended 30-09-13, compared with the
same period last year.
•
Over 90% of the MFIs (other than those
restructuring) showed positive growth.
•
MFIs received total debt funding of Rs. 3,780 crore,
of which, 86% came from banks and rest from other
financial institutions.
Sushil Chokhandre
under corporate debt

6. Microfinance companies
•
Micro Finance Institutions (MFIs) are the key players in helping and
supporting the cause of financial inclusion.
•
Micro-finance companies in India usually borrow from mainstream banks
and provide loans as small as $US200 to poor borrowers, mostly women,
for starting small businesses such as buying livestock.
•
The micro-loan companies operate in areas where there are no bank
branches and people traditionally have relied on loan sharks who charge
exorbitant rates.
•
The MFIs are reaching to the 70% of the poorest districts of India
Few Major MFIs –
–
–
–
–
–
Sushil Chokhandre
SKS Microfinance.
Grama Vidiyal
Asmitha Microfinance
Cashpro Microfinance
Trident microfinance
Samridhi Microfinance

7. Types of MFIs
•
MFIs include non-governmental organizations (NGOs),
credit unions, non-bank financial intermediaries, and evena
few commercial banks.
•
Classification:
Not for Profit MFIs
NGO-MFIs
Non-Profit Companies
Mutual Benefit MFIs
Mutually Aided CooperativeSocieties (MACS) and set up
institutions.
– For Profit MFIs
– Non-Banking Financial Companies ( NBFCs)
–
–
–
–
–
Sushil Chokhandre

8. Sushil Chokhandre

9. Micro finance models
•
Conventional Method
– community-based or in-house banking
•
Bank Partnership Model
– The bank acts as the lender and the MFI acts as
an agent which takes care of work related to
supervision, recovery and credit monitoring.
•
Banking Correspondents
– MFIs are allowed to collect the savings from the
targeted population on behalf of the bank.
•
Service Company Model
– Bank forms its own MFI perhaps as an NBFC, and
then it works together with that particular MFI to
provide loans and other services.
Sushil Chokhandre

10. Micro Finance - Streams
•
Demand Stream
•
•
•
Forum of clients– primary poor SHGs and un-organised
individual clients.
Association/organisations of poor SHGs and its federations,
cooperatives (community ownership and governance)
Enabling Stream
•
Promotional
donors
•
•
institutions:
NGOs,
philathropic
institutions,
Regulatory institutions: RBI/ State and Central Goverments.
Supply Stream
**Savings and credit
•
•
•
•
•
Sushil Chokhandre
Commercial ,rural and Private Banks
Cooperative banks
Speacialised developemtn financial institutions ( housing
banks, SIDBI)
Insurance companies
Post office

11. SWOT Analysis - Strength
•
Reliable business model.
•
Reduces poverty
•
Attract investors looking to spread risks
and diversify their portfolios.
•
Focus
on
consumer
protection,
transparency, and governance.
•
Strong support from banks & NGOs
who are able to access bulk funds for
on-lending.
•
Huge networking available.
•
SHG bank linkages- widely adopted
approach involving bank, NGOs & poor
Sushil Chokhandre

12. SWOT Analysis: Weaknesses
•
•
High interest rate than the rates charged
on normal bank loans.
•
High transaction cost
•
Large segment is still untouched due to
access problem.
•
Many poor still prefers informal providers
(local Zamindars, Chit Funds) of finance
which charge at a high interest rate.
•
MFIs targets WOMEN.
•
Many places in States such as Uttar
Pradesh, Bihar and Madhya Pradesh are
under-served.
•
Sushil Chokhandre
Not properly regulated.
Loan fatigue- poor recovery, politicized

13. Opportunities
•
Rate ceilings from Govt.
•
Huge demand and supply gap
•
Huge potential & heavy need for this market.
•
Participation
institutions.
•
Inclusion of innovative models and initiatives.
•
Employment Opportunity
•
Opportunity for Pvt. Banks
•
Government should encourage competition,
capacity building, and innovation to lower
interest rates, and costs in microfinance.
Sushil Chokhandre
of
private
industries
and

14. Threats
•
•
Global financial storm
•
Uncertain regulatory
underlined concerns.
•
High Competition
•
policies and procedures of central banks
which might pose hurdles to poor people.
•
Risks to MFIs – Credit risk, Operational risk,
strategic risk, liquidity risk, market risk,
fraud and legal risks, reputation risk,
External business risk.
•
Sushil Chokhandre
Neophyte Industry
Over involvement of Government
future
due
to
the

15. This presentation has been made
from my understanding of the
concept through internet,
through various sources..
This ppt is for reference only.
Sushil Chokhandre