3. Final Project
The Significance of Micro Finance
Presented By:
Tashfeen Shahid BM-25576
Mehwish Bhutto BM-25408
Syed Hassan Ali BM-25409
4.
5. Introduction
• The term ‘micro-credit’ was first invented in the
1970s to indicate the facility of loans to the poor
to establish income.
• Microfinance principally includes micro-credit, micro-
savings and micro-insurance and money transfers for
the poor.
• Micro-credit, which is part of microfinance, is the
practice of delivering small, collateral-free loans to
usually unsalaried borrowers or members of
cooperatives who otherwise cannot get access to
credit.
6.
7.
8.
9. Purpose of Study
• The purpose of study of microfinance is to eliminate
poverty i.e. to raise income levels and to broaden
financial markets by providing financial and no-
financial services to the financially excluded people.
• Microfinance targets the poor and the economically
active poor in the society to assist them create
wealth, accumulate assets and raise income to
smooth consumption.
10. Research Aim & Objective
We set out to review of experimental research on the
significance of microfinance (specifically micro-credit
and micro-savings) on poor people in Pakistan
Synthesize what these studies tell us about:
• The impact of microfinance on the incomes of the
poor.
• The impact of microfinance on wider poverty/wealth
of the poor.
• The impact of microfinance on other non-financial
outcomes for the poor.
11. Modes of Financing
• The act of providing funds for business activities, for
making purchases or investing.
• Financial institutions and banks are in the business
of financing as they provide capital to
businesses, consumers and investors to help them
achieve their goals.
• There are different modes of financing i.e.
Inventory Financing
In-Housing Financing
Investment Bank
Debt Financing
Equity Financing
12.
13. Roles of NGOs
• A non-governmental organization (NGO) is a citizen-
based association that operates independently of
government, usually to deliver resources or serve
some social or political purpose.
• The field of development itself expands and shifts
importance with the pull of ideas, and NGOs perhaps
more willingly adopt new ideas.
• Fund for Agricultural Development (IFAD), United
Nations Development Programme (UNDP), World
Bank, Department for International Development, UK
(DFID)], and lately commercial banks, has greatly
added to the idea pull.
14. Contd………
• Encouraged by the worldwide focus on
microfinance, donor NGOs too have been funding
microfinance projects. One might call it the supply
push.
• Most NGO-led microfinance is with poor women, for
whom access to small loans to meet dire
emergencies is a valued outcome.
• Lastly there are thousands of village level
development NGOs with little knowledge of
microfinance, other than that their beneficiaries
need access to credit.
15. Impact of Micro Finance
• Impact of Economy
• Impact on Poverty Reduction
18. Risk of Micro Finance
Risk in Agriculture Sector:
• Agriculture is widely considered to be inherently
riskier than industry or trade because it is more
easily, directly, frequently, and severely affected by
such factors as extreme weather, pests, diseases, and
other natural calamities.
• Hence, agricultural microfinance is riskier than
agricultural finance in general and non-agricultural
microfinance in particular.
• Agricultural microfinance, for example, becomes
riskier when the agricultural activities of poor.
19. Loan Process of Micro Finance
Introduction:
• A loan is a type of debt. Like all debt instruments, a
loan entails the redistribution of financial assets over
time, between the lender and the borrower.
• In a loan, the borrower initially receives or borrows
an amount of money, called the principal, from the
lender, and is obligated to pay back or repay an equal
amount of money to the lender at a later time.
• Typically, the money is paid back in regular
instalments, or partial repayments; in an
annuity, each instalment is the same amount.
20. Loan Process of Micro Finance
Loan Process:
• It has been decided to regulate microfinance sector
by the Reserve Bank as a separate category.
• A “qualifying asset” shall mean a loan distributed by
MFI.
• Banks have to ensure that MFIs comply with the
following caps on margin and interest rate.
• The banks should obtain from MFI, at the end of
each quarter, a Chartered Accountant’s Certificate.
• Bank loans to MFIs, which do not comply with above
conditions and bank loans to other NBFCs.
