Post on 14-Apr-2015
description
MicrofinanceMicrofinanceMicrofinanceMicrofinance
ABC WorkshopABC Workshop
1818thth Sep 2009 Sep 2009
Why Microfinance Exist?
• Accessibility• Cost of transaction• Dealing with bottom of pyramid• Credit worthiness of borrowers• Failure of formal financial institution
to reach and cater this segment
RBI mandates• Lending to Priority Sector (40% of Adjusted
Net Bank Credit)• 18% to agricultural sector
– Indirect lending not more than 4.5%
• 10% to weaker section• Banks falling short of target shall allocate
amount to RIDF at lower int. rate.(<2%:@BR; 2 – 5%: BR-1%, 5-9%: BR – 2%, >9%: BR – 3%)
Do people need MFI???• Presence of Money lenders• Is credit only the need?• How a MFI functions?• Catering poorest of the poor, poor,
not poor not well off, BPL, APL
Five fatal assumption about micro-credit
1. Assumption that the poorest all wish to be self-employed
2. Assumption that credit is the main financial service needed by the poor
3. Assumption that credit can automatically translate into successful micro-enterprises
4. Assumption that those slightly above the poverty line do not need microcredit, and giving it to them amounts to mis-targeting
5. Assumption that microcredit institutions can all become financially self-sustaining
NSSO data• 27% of household have access to
formal financial services• 22% of household don’t have access to
formal financial institution but are catered by informal sector (money lenders)
• Rest 51% don’t have any access of financial services at all
Two school of thoughts• Finance school• Poverty school
Hierarchy of credit needs & credit availability from
formal source
Consumption-smoothening needs
Production and productivity effectivisation needs
Production and Productivity enhancement needs
Diversification needs
CreditUsage
Microfinance• Micro-credit• Micro-saving• Micro-insurance• Remittance• Micro-pension
Models• Grameen Bank• SHG• Individual Lending
Interest structure• Cost of fund• Cost of delivery• Cost of recovery• Bad debt provision• Profit
Loan process• Village meeting• Formation of Group• Group discipline• Loan origination• Loan appraisal• Loan sanction• Disbursement• Recovery
Some terms• Outstanding, portfolio, Active
Borrowers, Repeat Borrowers• OTRR• FTOD, OD, PAR, NPA accounts
Risk• Adverse selection• Moral hazard
Micro-insurance• Life• Non-life
– Livestock– Micro-enterprise– Weather insurance
• Companies– MNYI, AVIVA, ROYAL SUNDARAM, ICICI
PRU, LOMBARD
Remittances• 10 million migrants• Money transfer• NCR, Mumbai, Surat• In collaboration of banks• Smart card, mobile and internet
technologies
Capacity building
• 23 MFI• 800+ NGOMFI, CBMFI• Creditworthiness• Unitus, Accion• Bell weather, IFMR, Accessdev,
Microsave, BASIX