Description
microfinance, emergence of microfinance, evolution of microfinance in India, features of indian microfinance, types of microfinance providers in India. It also covers rise and fall of SKS microfinance.
What is Microfinance ?
? Microfinance is a financial service to low income clients or solidarity lending groups
? Target groups include consumers and the self-employed , who traditionally lack access to banking and related services ? Financial services include credit, savings, insurance, money transfers etc
Emergence of Microfinance…
Prior Existence
• Prior existence of unorganized lending • Chit Funds – India ; Cheetu – Srilanka; Tandas - Mexico
• Modernizing Agricultural sector • Transformation in rural economy • Increased investment • Reducing indebtedness • Subsidized lending rates • Poor Repayment discipline
Goal
Objectives
Massive Capital Erosion
Microfinance came into scene!
?Started in 1970s as experimental programs in Bangladesh and a few other countries ?Tiny loans were extended to groups of poor women to invest in micro-businesses ?Credit was based on solidarity group lending
?Initiatives taken by ACCION International, Sewa bank , Grameen bank
Grameen Bank
? Founded in 1983 by Professor Muhammad Yunus in Bangladesh ? Addressed the banking problem faced by the poor through a programme of action-research ? Its initial success also stimulated the establishment of several other giant microfinance institutions like BRAC, ASA, Proshika ? It now serves more than 4 million borrowers
Evolution of microfinance in India
RRBs created in 1975 Creation of agricultural credit department in 1935
Gained impetus in 2002 when AB Vajpayee outlined a 8 point agenda for India’s growth
Mr. Vajpayee assured that it would be government’s endeavor to ensure that “ the poor and the unorganized sector have access to savings, credit and insurance services”.
Need for microfinance in India
?Estimated that 350 million people live Below Poverty Line ?This translates to approximately 75 million households ?Annual credit demand by the poor in the country was estimated to be about Rs. 60,000 crore ?Cumulative disbursements under all micro finance programmes is only about Rs. 5000 crores.(Mar. 02)???
Features of Indian Microfinance
?About 60 % of the MFIs are registered as societies
?About 20 % are Trusts
? About 65 % of the MFIs follow the operating model of SHGs ? Large concentration in South India-600 MFI initiatives have a cumulative outreach of 1.25 crore poor households
? NABARD’s bank linkage program has cumulatively reached a total of 9.4 lakhs SHGs with about 1.4 crore households
Types of Microcredit providers in India
3 Major players
SSFL
SKS Microfinance
?SKS Microfinance, India’s biggest lender to the poor
?Started in 1997, as a public society in form of an NGO ?In response to the growing demand of microfinance, SKS Society created a private company in 2003
?Was the first MFI in India to get listed in Aug 2010
Growth Story Of SKS Microfinance
?Since 2003, SKS has been focused almost exclusively on developing a model that could scale rapidly ?Large scale investments in Microfinance sector & Effective use of technology ?Offered Not just credit, but a range of other financial services (sold 2.4 million insurance policies in year 2009) ?As of September 2009 reached 5.3 million poor women, or some 20% of all MFI clients in India. ?Only 1-2 percent default
SKS Microfinance, a not for profit organization ????
?Charging an interest rate anywhere between (26-32) %. ?Cost of funding for SKS is approx. 18%. ? No relief to farmers, suicide rates have infact increased in the regions where SKS exists.
?Valued at whooping Rs.15000 Crore in year 2010.
Fall of SKS Microfinance
Reasons for downfall
Unethical Practices
Management disputes
Reasons for Downfall
State Govt. Regulations
Skepticism amongst the investors
The status of microfinance in India
? Gap between demand and supply
?Majority of poor are excluded
?High transaction costs ?Unfavourable Policies ? Lack of an appropriate legal vehicle ? Difficulty in accessing low cost on-lending funds
The status of microfinance in India(contd.)???
?56 % of the poor still borrow from informal sources
?70 % of the rural poor do not have a deposit account
?87 % have no access to credit from formal sources
? > 15 % of the households have any kind of insurance ?Negligible numbers have access to health insurance
Challenges Ahead…
Accessibility to cheap Loans
Proper legal Framework
Challenges
Human Resource
Ability to innovate, adapt & Grow
Projections for the future
?Annual growth rate of about 20 % during the next five years ?75 % of the total poor households of 80 million (i.e. about 60 million will be reached in the next five years) ?The loan outstanding will consequently grow from the present level of about 1600 crore to about 42000 crore
Soul Searching for MFIs
? The main objective of Microfinance was to achieve financial inclusion by giving credit and other financial services at a nominal rate ? What is been seen is that people who are creditworthy are given loans at 12% while the people who are poor are getting it at 30% ? Little oar no impact in 86% of the country – unprecedented suicides
“MFIs are the institutions who provide loans to the people who actually do not need it.” – Shankar Sharma, a renowned investor
“If you are uplifting the poor you’re uplifting the nation.”
---Mahatma Gandhi
Thank You !
doc_661240000.pptx
microfinance, emergence of microfinance, evolution of microfinance in India, features of indian microfinance, types of microfinance providers in India. It also covers rise and fall of SKS microfinance.
What is Microfinance ?
? Microfinance is a financial service to low income clients or solidarity lending groups
? Target groups include consumers and the self-employed , who traditionally lack access to banking and related services ? Financial services include credit, savings, insurance, money transfers etc
Emergence of Microfinance…
Prior Existence
• Prior existence of unorganized lending • Chit Funds – India ; Cheetu – Srilanka; Tandas - Mexico
• Modernizing Agricultural sector • Transformation in rural economy • Increased investment • Reducing indebtedness • Subsidized lending rates • Poor Repayment discipline
Goal
Objectives
Massive Capital Erosion
Microfinance came into scene!
?Started in 1970s as experimental programs in Bangladesh and a few other countries ?Tiny loans were extended to groups of poor women to invest in micro-businesses ?Credit was based on solidarity group lending
?Initiatives taken by ACCION International, Sewa bank , Grameen bank
Grameen Bank
? Founded in 1983 by Professor Muhammad Yunus in Bangladesh ? Addressed the banking problem faced by the poor through a programme of action-research ? Its initial success also stimulated the establishment of several other giant microfinance institutions like BRAC, ASA, Proshika ? It now serves more than 4 million borrowers
Evolution of microfinance in India
RRBs created in 1975 Creation of agricultural credit department in 1935
Gained impetus in 2002 when AB Vajpayee outlined a 8 point agenda for India’s growth
Mr. Vajpayee assured that it would be government’s endeavor to ensure that “ the poor and the unorganized sector have access to savings, credit and insurance services”.
Need for microfinance in India
?Estimated that 350 million people live Below Poverty Line ?This translates to approximately 75 million households ?Annual credit demand by the poor in the country was estimated to be about Rs. 60,000 crore ?Cumulative disbursements under all micro finance programmes is only about Rs. 5000 crores.(Mar. 02)???
Features of Indian Microfinance
?About 60 % of the MFIs are registered as societies
?About 20 % are Trusts
? About 65 % of the MFIs follow the operating model of SHGs ? Large concentration in South India-600 MFI initiatives have a cumulative outreach of 1.25 crore poor households
? NABARD’s bank linkage program has cumulatively reached a total of 9.4 lakhs SHGs with about 1.4 crore households
Types of Microcredit providers in India
3 Major players
SSFL
SKS Microfinance
?SKS Microfinance, India’s biggest lender to the poor
?Started in 1997, as a public society in form of an NGO ?In response to the growing demand of microfinance, SKS Society created a private company in 2003
?Was the first MFI in India to get listed in Aug 2010
Growth Story Of SKS Microfinance
?Since 2003, SKS has been focused almost exclusively on developing a model that could scale rapidly ?Large scale investments in Microfinance sector & Effective use of technology ?Offered Not just credit, but a range of other financial services (sold 2.4 million insurance policies in year 2009) ?As of September 2009 reached 5.3 million poor women, or some 20% of all MFI clients in India. ?Only 1-2 percent default
SKS Microfinance, a not for profit organization ????
?Charging an interest rate anywhere between (26-32) %. ?Cost of funding for SKS is approx. 18%. ? No relief to farmers, suicide rates have infact increased in the regions where SKS exists.
?Valued at whooping Rs.15000 Crore in year 2010.
Fall of SKS Microfinance
Reasons for downfall
Unethical Practices
Management disputes
Reasons for Downfall
State Govt. Regulations
Skepticism amongst the investors
The status of microfinance in India
? Gap between demand and supply
?Majority of poor are excluded
?High transaction costs ?Unfavourable Policies ? Lack of an appropriate legal vehicle ? Difficulty in accessing low cost on-lending funds
The status of microfinance in India(contd.)???
?56 % of the poor still borrow from informal sources
?70 % of the rural poor do not have a deposit account
?87 % have no access to credit from formal sources
? > 15 % of the households have any kind of insurance ?Negligible numbers have access to health insurance
Challenges Ahead…
Accessibility to cheap Loans
Proper legal Framework
Challenges
Human Resource
Ability to innovate, adapt & Grow
Projections for the future
?Annual growth rate of about 20 % during the next five years ?75 % of the total poor households of 80 million (i.e. about 60 million will be reached in the next five years) ?The loan outstanding will consequently grow from the present level of about 1600 crore to about 42000 crore
Soul Searching for MFIs
? The main objective of Microfinance was to achieve financial inclusion by giving credit and other financial services at a nominal rate ? What is been seen is that people who are creditworthy are given loans at 12% while the people who are poor are getting it at 30% ? Little oar no impact in 86% of the country – unprecedented suicides
“MFIs are the institutions who provide loans to the people who actually do not need it.” – Shankar Sharma, a renowned investor
“If you are uplifting the poor you’re uplifting the nation.”
---Mahatma Gandhi
Thank You !
doc_661240000.pptx