Global Business - Final Ppt
Transcript of Global Business - Final Ppt
-
8/2/2019 Global Business - Final Ppt
1/73
MICROFINANCE INDUSTRYAND INDIAN ECONOMY &BANGLADESH ECONOMY
PRESENTED BY:-NAROTTAM KUMAR R. No. 33NAVEEN RANA R. No. 34NAVNEET KAUR R. No. 35NAYEEM SAIKIA R. No.36PINTU KUMAR R. No. 37
-
8/2/2019 Global Business - Final Ppt
2/73
BANKING
MICROFINANCE
-
8/2/2019 Global Business - Final Ppt
3/73
What is microfinance ?
Micro finance is the
provision of financial
services - To those who
are excluded fromconventional
commercial financial
services. Because they
are too poor to offermuch - or anything - in
the way of collateral .
-
8/2/2019 Global Business - Final Ppt
4/73
Cont..
It presents a series ofexciting possibilitiesfor:
It just not credit butalso savings, insurance,and fund transfers.
Extending markets.
reducing poverty and Fostering social
change.
-
8/2/2019 Global Business - Final Ppt
5/73
Origin of Microfinance
The concept of microfinance originated inthe mid-1970s inBangladesh through apioneering experimentby Dr. MuhammadYunus, then a Professorof Economics.
Muhammad Yunus wasawarded the 2006Nobel Peace Prize.
-
8/2/2019 Global Business - Final Ppt
6/73
Cont.
Dr. Mohammad Yunus Established
Bangladesh Grameen Bank
Providing financial services andentrepreneurship opportunities to poor.
So they could produce, manage and maintaintheir own finances.
It was an end to mistreatment by moneylenders.
-
8/2/2019 Global Business - Final Ppt
7/73
-
8/2/2019 Global Business - Final Ppt
8/73
Objectives
Extend banking facilities to poor people.
Eliminate the exploitation of the poor people bymoney lenders.
Create opportunities for self-employment forunemployed people in rural Bangladesh.
Reverse vicious circle of "low income, low saving& low investment", into virtuous circle of "lowincome, injection of credit, investment, moreincome, more savings, more investment, moreincome".
-
8/2/2019 Global Business - Final Ppt
9/73
Microfinance Products Micro savings A possibility to save money
without no minimum balance. Allows people toretain money for future use Members mayborrow from the group fund for a variety ofpurposes ranging from household emergencies
to school fees
Micro insurance The different types ofinsurance services are life insurance , propertyinsurance, health insurance and disabilityinsurance.
-
8/2/2019 Global Business - Final Ppt
10/73
Cont
Micro leasing For entrepreneurs or small businesseswho cant afford buy at full cost they can insteadlease equipment, agricultural machinery or vehicles.
Money transfer A service for transferring money,overseas to family or friends. Money transferswithout opening current accounts are performed by anumber of commercial banks through international
money transfer systems such as Western Union ,Money Gram, and Anelik.
-
8/2/2019 Global Business - Final Ppt
11/73
Types of Microfinance Institutions
Non Profit MFIS/NGO MFIS: These are societies under the SocietiesRegistration Act, 1860. they carry out both non financial & financialactivities apart from financial intermediation as they are prohibitedfrom carrying out financial activities For Profit MFIs: They include NBFCs registered under CompaniesAct, 1956 & banks which provide microfinance apart from otherbanking services. Mutual Benefit MFIs: This category includes state credit co-operatives, national credit cooperatives & mutually aidedcooperative societies (MACS) During 1980s & 1990s, several NGOs entered the microfinancesector providing micro loans. NABARD & Small Industries Development Bank of India(SIDBI)became intermediaries b/w the poor borrowers & the banks. During the late 1990s there was a growing trend of NGOstransforming into microfinance organizations. Banks were not willing to lend to the MFIs as they were not sure oftheir credit worthiness. Thus M-CRIL(Micro Credit Ratings International Limited) waslaunched.
-
8/2/2019 Global Business - Final Ppt
12/73
Process of Micro Loan distribution
A micro credit program gives small loans tothe poor so that they can procure whateverthey need to start a small local business oftheir choice.
-
8/2/2019 Global Business - Final Ppt
13/73
Cont.
A micro loan of
Rs.5000 - 20000 at 1
or 1.5% interest per
month, can empower
people to start theirown business
By that money they
can start business
of:
-
8/2/2019 Global Business - Final Ppt
14/73
Cont.
Kirana store Bangles shop
-
8/2/2019 Global Business - Final Ppt
15/73
Buy a cow or buffalo to sell milk
-
8/2/2019 Global Business - Final Ppt
16/73
Candle Making
-
8/2/2019 Global Business - Final Ppt
17/73
Small garments manufacturing unit
-
8/2/2019 Global Business - Final Ppt
18/73
Fruit and vegetable shop
-
8/2/2019 Global Business - Final Ppt
19/73
Process of Micro Loan distribution
In the absence of
collateral, the loans
are made to groups of
five, mostly women,who guarantee each
others' loans.
Called Joint liability
Group (JLG).
-
8/2/2019 Global Business - Final Ppt
20/73
Cont.
If a woman wants to receive aloan and if her idea for abusiness is accepted, she isencouraged to find four otherwomen and form a group
Then, the first two women aregiven loans and the others areencouraged to help them maketheir enterprise a success.After about 6 weeks, if the first
two are making their paymentson time, the next two womenget their loans and six weekslater the last one.
-
8/2/2019 Global Business - Final Ppt
21/73
Cont.
All persons who havepaid back a first loan,are automaticallyeligible for a second loanand eventually a third sotheir businesses cangrow. At the same time fromthe interest, the loanfund is growing, thoughslowly, and loans areavailable to morepersons.
-
8/2/2019 Global Business - Final Ppt
22/73
Cont.
If one does not payback one's loan, noone in the group willreceive a secondloan. To guard againstemergencies, suchas one's cow dyingand not being able
to repay the loan, anemergency fund isset up at the time ofthe first loan.
-
8/2/2019 Global Business - Final Ppt
23/73
Need of microfinance
1) Banks have not providedfinancial services, such asloans, to clients with littleor no cash income.
2) Banks incur substantial
costs to manage a clientaccount, regardless of howsmall the sums of moneyinvolved.
3) For example : Although the
total gross revenue fromdelivering one hundredloans worth $1,000 eachwill not differ greatly fromthe revenue that results
from delivering one loan of$100,000.
-
8/2/2019 Global Business - Final Ppt
24/73
Cont
4) Money lenders usually charge higherrates to poorer borrowers than to lesspoor ones.
5) when poor people borrow they often relyon relatives or a local moneylender.
6) An analysis of 28 studies of informalmoney lending rates in 14 countries in
Asia, Latin America and Africa concludedthat 76% of moneylender rates exceed10% per month.
-
8/2/2019 Global Business - Final Ppt
25/73
Social Impact of Microfinance
The empowerment of
women.
As the microfinanceservices mostly offered
to women, they are
now more financially
literate and confident.
-
8/2/2019 Global Business - Final Ppt
26/73
Building Economiccitizenship
Financial services foster Independence.
Microfinance can help clients to grow moreconfident and with that economic citizenship
they can step out and become economical.
sound.
-
8/2/2019 Global Business - Final Ppt
27/73
To fight with poverty
Normally If a poor household loses a sourceof income he might have to withdraw a child
from school or selling valuable assets or fall
deep into poverty.
-
8/2/2019 Global Business - Final Ppt
28/73
Financial services give
clients to access to
education, healthcare,
and other necessitiesthat improves their
quality of life. i.e.
school fee loan, health
insurance and homeimprovement loan.
-
8/2/2019 Global Business - Final Ppt
29/73
Dark side of Microfinance Micro Loans should never lends to
individuals without first providingthem with the expertise andtraining to build a business planthat is likely to succeed.
Another point in this regard is thatmere flow of funds alone in MFsector cannot bring desired levelof social impact unless otherinfrastructure is enough in the
given area/region to absorb thefunds.
-
8/2/2019 Global Business - Final Ppt
30/73
Multiple lending and over-
indebtedness: It is not unusual that
poor households borrowfrom more than onesource, formal as well asinformal.
statistic with an average4 loans per family, in AP.
credit, to ill-informedclients and by poorly
trained staff driven byperverse incentives oftenleads to disasters.
-
8/2/2019 Global Business - Final Ppt
31/73
Microfinance Interest rates
It has been reported in
the media that MFIs
charge between 26-
60% p.a.
-
8/2/2019 Global Business - Final Ppt
32/73
Coercive collection practices
Serious irregularities and arm-twistingmethods for recovery of money that MFIsadopt.
As many as 30 rural borrowers havecommitted suicide in Andhra Pradesh in last
year following their inability to pay backloans taken from microfinance institutions atexorbitant interest rates.
-
8/2/2019 Global Business - Final Ppt
33/73
Indian economy
The Economy of India is
the eleventh largest in
the world by nominal
GDP.
The fourth largest by
purchasing power parity.
Economists predict that
by 2020, India will beamong the leading
economies of the world.
-
8/2/2019 Global Business - Final Ppt
34/73
-
8/2/2019 Global Business - Final Ppt
35/73
Service sector
Since 1960s, there has been asteady decline in thecontribution of agricultureand primary sector to GrossDomestic Product (GDP),and its place has been takenby service based enterprises.
Thus, service sectorencompasses the major areasof trade, finance, insurance,
communications, publicutilities, transportation,health care, education,business and personalservices.
-
8/2/2019 Global Business - Final Ppt
36/73
Cont.
1) India is 13th in
services output. The
services sector
provides employmentto 34% of the work
force.
2) It has the largest
share in the GDP with55.3%
-
8/2/2019 Global Business - Final Ppt
37/73
Agriculture
1) India ranks secondworldwide in farm output.Agriculture and alliedsectors like forestry,logging and fishingaccounted for 16.1% ofthe GDP.
2) It employed 52.1% of thetotal workforce.
3) India is the largestproducer in the world of
milk, jute and pulses, andalso has the world'ssecond largest cattlepopulation with 175 millionanimals in 2008.
-
8/2/2019 Global Business - Final Ppt
38/73
Cont.
It is the second largest
producer of rice, wheat,
sugarcane, cotton and
groundnuts, as well asthe second largest fruit
and vegetable producer,
accounting for 10.9%
and 8.6% of the worldfruit and vegetable
production respectively.
Growth Expected in India
-
8/2/2019 Global Business - Final Ppt
39/73
GDP USD 590 billion
GDP growth rate 9 %
Services contribution 54 %
FDI limit not 100 percent in majorindustry sectors such as Telecom,
Semiconductors, Automobiles, etc.
Balance of Trade USD (-)46.2 billion
Investment goal USD 250 billion
2006
GDP growth rate 9.5%
Services contribution 60 %
FDI limit is expected to be close to
100 percent in major industry sectors
such as Telecom, Semiconductors,
Automobiles, etc.
Balance of Trade Should increase
with surging exports as compared
with imports
2015 GDP growth rate 13%
Services contribution 65-70%
FDI limit is expected to be 100
percent in major industry sectors
such as Telecom, Semiconductors,
Automobiles, etc.
Balance of Trade Should be positive
with increased level of exports as
compared with imports
2020
Growth Expected in India
-
8/2/2019 Global Business - Final Ppt
40/73
Microfinance in India
Magazine ForbesIn its firstever list of World's Top 50Microfinance Institutions whichhas named seven such entitiesin the list of world's top 50 --highest for a country.
Bandhan at the secondposition Microcredit Foundation of India
(ranked 13th) and Saadhana Microfin
Society (15th)
Grameen Koota (19th), Sharada's Women's
Association for WeakerSection (23rd)
SKS Microfinance Private Ltd(44th) and
Asmitha Microfin Ltd (29th).
-
8/2/2019 Global Business - Final Ppt
41/73
Concentration More in South India
-
8/2/2019 Global Business - Final Ppt
42/73
Key Reasons
The origination of the bank SHG linkage program inKarnataka largely through the initiatives of thenongovernment organization (NGO) MYRADA and theconsequent greater participation of Karnataka-basedbanks, such as the Syndicate and Canara Banks, in the
program
More vibrant local economies in the southern statescompared to the less developed states in the north andeast
Higher literacy and participation rates of women in thelocal economy making them more suitable clients forMFIs.
-
8/2/2019 Global Business - Final Ppt
43/73
Key Players
SKS Microfinance Ltd. Spandana Sphoorty Financial
Limited Share Microfin Limited Bandhan
Asmitha Microfin Ltd. Shri Kshetra DharmasthalaRural Development Project(SKDRDP)
BASIX Microcredit Foundation of
India Grameen Koota
-
8/2/2019 Global Business - Final Ppt
44/73
Number of branches as on March'2010
1627
1533
1056
1550
SKS
Spandana
SHARE
Bandhan
Number of branches
-
8/2/2019 Global Business - Final Ppt
45/73
CONT..
In India, Micro finance is growing faster thanbanking and, if the experience in other
developing countries is mirrored here,microfinance will reach more individuals than
the banking sector,
- Robert Annibale, global director Citigroup Inc.
Microfinance
-
8/2/2019 Global Business - Final Ppt
46/73
0
5
10
15
20
25
30
35
2008 2010 2015
Banking
Microfinance
Nos.
ofClientsinMillions
*For 2015 the projection sourced from citigroup microfinance
-
8/2/2019 Global Business - Final Ppt
47/73
Microfinance in Andhra Pradesh
Why do poor need financial services?A study in Andhra Pradesh revealed that for the poor, about 50% of allrisky events were characterized as health-related and another 28%were nature-related.
Responses to these risks -
1
st
preference of the rural poor is borrowing (money lenders havevery high interest rates, subject to exploitation),
Followed by mortgaging/selling assets (often under difficultconditions that limits the value received for such assets).
Why don't they just go to a bank?The poor rarely have access to the formal financial sector No money to open a savings account
No collateral or credit record to secure a loan
Illiterateso cant do paperwork
-
8/2/2019 Global Business - Final Ppt
48/73
Bangladesh economy
1) The economy ofBangladesh is adeveloping market-based economy
2) Bangladesh ranked asthe 48th largesteconomy in the world
3) The economy has grownat the rate of 6-7% p.a.
over the past few year4) Currency of Bangladesh
is taka.
-
8/2/2019 Global Business - Final Ppt
49/73
CONT..
More than half of the GDP belongs to the servicesector, nearly half of Bangladeshis are employed inthe agriculture sector, with RMG, fish, vegetables,leather and leather goods, ceramics, rice as otherimportant produce.
Contribution in GDP (est.)
1) Agriculture: (18.6%),2) Industrie: (28.6%),
3) services: (52.8%)
A i l f B l d h
-
8/2/2019 Global Business - Final Ppt
50/73
Agriculture of Bangladesh
Bangladesh's labor-intensive agriculture has achievedsteady increases in food grain production despite theoften unfavourable weather conditions
Most Bangladeshis earn their living from agriculture.
Although rice and jute are the primary crops, maizeand vegetables are assuming greater importance.
rice can be grown and harvested three times a year inmany areas.
Tea is grown in the northeast.
M f t i & I d t
-
8/2/2019 Global Business - Final Ppt
51/73
Manufacturing & Industry
Main industries cotton textiles, jute, garments, teaprocessing, paper newsprint, cement, chemical fertilizer,light engineering, sugar.
Many new jobs - mostly for women - have been createdby the country's dynamic private ready-made garmentindustry,
which grew at double-digit rates. mostly women, were employed in the garments sector as
well as Leather products specially Footwear(Shoemanufacturing unit).
Bangladesh has overtaken India in apparel exports in
2009, Other industries which have shown very strong growth
include the chemical industry, steel industry, miningindustry and the paper and pulp industry.
-
8/2/2019 Global Business - Final Ppt
52/73
CONT..
textile products, is the
nation's number one
export earner.
Bangladesh is 3rd inworld textile exports.
Export $ 16.7 billion in
2009-10.
-
8/2/2019 Global Business - Final Ppt
53/73
Investment
The stock market capitalization of the Dhaka
Stock Exchange in Bangladesh is 5649.645.
Major investment from foreign investorshave led to a massive building boom in Dhaka
and Chittagong.
-
8/2/2019 Global Business - Final Ppt
54/73
Grameen Bank
Established in 1976 in Jobra village inBangladesh by Professor Muhammad Yunus .
It provides credit to the poorest of the poor inrural Bangladesh without any collateral.
By June 2010:-2,564 branches in 81,362 villages
-8.28 million borrowers (90% are women).
Total equity:-90% - Borrowers
-10% - Government
-
8/2/2019 Global Business - Final Ppt
55/73
Economy of United States
The economyof the UnitedStates is the world's largestnational economy.
Its nominal GDP wasestimated to be nearly $14.7
trillion in 2010.
GDP growth 2.9% (2010)
GDP by sector agriculture:(1.2%), industry: (21.9%),services: (76.9%).
Inflation (CPI) 1.6% (2011)
GDP per capita $47,132(2010)
-
8/2/2019 Global Business - Final Ppt
56/73
Microfinance in the United States
Idea of Microfinancewas born inBangladesh andmigrated to U.S.
Microfinance Emergedat a time of aParadigm shift.
Commitments to:1. Fiscal Discipline.
2. Deregulation.3. Interest rates.4. Market-Oriented
approaches.
Characteristics of Microfinance in the
-
8/2/2019 Global Business - Final Ppt
57/73
Characteristics of Microfinance in the
U.S
First Programs is modeled after Grameen Bankand Group Lending Concept.
Shift to Individual Lending.
Emphasis on Training and Skills Development. Goals of Microfinance in U.S.:
1. Job Creation and Income Generation.
2. Individual and Community Empowerment.3. Relationship Building and Community
Development.
-
8/2/2019 Global Business - Final Ppt
58/73
Major U.S Microfinance Programs
ACCION U.S.1. Focus on Lending and
loans.2. CREDIT BUILDER3. Lent $100 million to
10000 people in 33communities.
4. 80% of borrowers areminorities 50% arewomen.
5. Lends to persons with aproven track record.
6. Awards and achievements.
-
8/2/2019 Global Business - Final Ppt
59/73
Microfinance Programs in U.S
Southern Good Faith Fund(SGFF) :
1. Nonprofit affiliate ofSouthern Bancorp.
2. Originally modeled after
Grameen Bank but has shiftedfocus overtime.
3. Three Primary Areas of
focus:
a) Asset Builders program.
b) Business Development
center.
c) Career Pathways
program.
-
8/2/2019 Global Business - Final Ppt
60/73
Economy of Tanzania
Currency Tanzanian shilling(TZS)
GDP : $57.5 billion (2009)
GDP growth: 6.4% (2010)
GDP per capita $1,500(2010)
GDP by sector: Agriculture(26.6%), Industry (22.6%),Services (50.8%)
Inflation :12.10% (2010)
-
8/2/2019 Global Business - Final Ppt
61/73
Microfinance in Tanzania
Microfinance is still, arelatively new concept inTanzania
It was mainly linked towomen and povertyalleviation.
The National MicrofinanceBank is an institutionalprovider of microfinanceservices.
It plans to add 16 morebranches and offices that
can offer microfinanceservices. NMB encourages and
expands microfinance inthree ways:
-
8/2/2019 Global Business - Final Ppt
62/73
CONT
Loans to micro and small enterprises for the
purchase and inventory and supply of goods.
Collection and payment services to large
corporate clients to/from micro and smallenterprises.
Add-on services such as money transfers and
payroll services to both the large corporateclients and micro and small enterprises.
-
8/2/2019 Global Business - Final Ppt
63/73
Microfinance in Bolivia
Microfinance has beendeveloping in Bolivia foralmost twenty years andits evolution can bedivided into distinct
stages. The first stage is when a
number of what latercame to be the leadingMFIs were founded in(1986) and operated asmicrocredit NGOs for anumber of years.
-
8/2/2019 Global Business - Final Ppt
64/73
CONT
The second stage was the transformation of theleading NGOs into regulated financialintermediaries, a process that began in 1992.
During this period the Bolivian bankingauthorities generated the special non-banklicense for finance companies (FFP).
The third stage of microfinance development in
Bolivia began in 1999 with a generalizedmacroeconomic crisis that seriously affected thesector.
-
8/2/2019 Global Business - Final Ppt
65/73
CONT.
Lately, the microfinance sector seems to have
finally consolidated after the crisis, and
growth rates in terms of both clients and
volume of operations on both sides of thebalance sheet.
-
8/2/2019 Global Business - Final Ppt
66/73
Microfinance in Brazil
The story of microfinancein Brazil has mostly beenone of the unfulfilledpromise. There are
approximately 10 to 15million households in theinformal sector in thecountry yet.
The microcredit industryhas reached fewer than300,000 of thesehouseholds.
-
8/2/2019 Global Business - Final Ppt
67/73
CONT.
In Brazil, there are roughly four types of
institutions offering microfinance services.
Only one of these organizations is offering
anything besides credit services State-owned development bank
Public Interest Civil Society (OSCIPs)
Microenterprise Credit Society (SCMs)
Commercial banks
-
8/2/2019 Global Business - Final Ppt
68/73
CONT
It is significant, however, that these types ofinstitutions only offer credit services to poorhouseholds and micro entrepreneurs.
The Brazilian government began to recognize the
bottleneck this created and in recent years haspromoted a number of regulatory amendments thathave pushed commercial banks into the market.
to increase access to financial services on the part
of the general population, especially lower incomesectors. Banks were allowed to establish Banking
Correspondents .
-
8/2/2019 Global Business - Final Ppt
69/73
Microfinance in Indonesia
Indonesia has a century-long history inmicrofinance that datesback to Dutch colonialtimes at the close of the19th century.
There are many varietiesof formal, semi-formaland informal financialinstitutions, as well assubsidized governmentprograms offering loanslinked to sectordevelopment or povertyalleviation.
-
8/2/2019 Global Business - Final Ppt
70/73
CONT.
The total number of MFIs are 60,760 or around 7times the number of branches of commercialbanks. These MFIs collectively served more than18.6 million people (8% of the population).
Commercial Banks (including Bank RakyatIndonesia BRI):- established originally toimplement a government-subsidized agriculturalcredit program. They were subsequently re-
organized to offer commercial microfinance atscale, and they handle the largest portion ofmicrofinance in Indonesia.
-
8/2/2019 Global Business - Final Ppt
71/73
-
8/2/2019 Global Business - Final Ppt
72/73
-
8/2/2019 Global Business - Final Ppt
73/73
QUESTIONS TO BE ASKED