Microfinance Institutions

to serve the unserved

unemployed

low income individuals

AIM

upliftment of underprivileged

short term loans- set up venture, get trained

operate in forms & shape

joint liability group

SHGs

Grameen Bank Model

rural cooperatives

operation

  • official appointed - financial institution -touch with the group to discuss loan application and disbursal procedure.
  • understands the skill & requirement

on the basis finalizes amount

• officer understands business that the borrower is currently conducting or interested to start in future, analyses risk factor associated with it

Role

role

Women Empowerment

financial servicers poor unprivileged

no access formal lending institution

Rural develop.

poor

no formal employment

no bankable

force - borrow local money lenders - exorbitant rates

credit in absence of morgage

financing the unfinanced

devising best way to deliver services to poor

in line with their requirement

devel. most efficient & effective mechanism - finance

impact

world bank - 500 M directly or indirectly benefited

benefits beyond - capital

successful entrepreneurs

create jobs, trade, economic improvement of the community

issues

higher interest

12-30% as compared commercial banks 8-12%

RBI removed upper limit 26% interest MFI loans

farm suicides - Andhra & MH

Over-dependence on banking sector

80% funds - banks mostly private

high rate of interest & terms of loans shorter

incompetent or less reactive to default

Lack of awareness of financial service

low financial literacy-76% not understand basic financial concepts

MFI struggle - financially viable

Regulatory Issues

RBI

needs and anatomy different from banks

impact

failure - devel. new financial products & services

Appropriate Model

MFI follow SHG or JLB model

affects

sustainability - longer run

increase risk beyond poor can bear

sugggestion

supervision

ground realities

operational efficiency

incentivize

open branches - unbanked villages

encourage complete range products. transparent pricing & technological implementation - efficiency & uniformity

inability of MFI sufficient funds

hindrance to growth

alternative sources of funds

equity investment, portfolio buyouts and securitization of loans few large MFI availing

separate regulatory authority-

discourage malpractice and political influence

💪 Strengthening the credit check and debt collection processes and educating the villagers about products and consequences is