MFIs & Financial Inclusion
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Transcript of MFIs & Financial Inclusion
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8/14/2019 MFIs & Financial Inclusion
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&MFIs Financial Inclusion&MFIs Financial Inclusion
:Group 6:Group 6
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SummarySummary
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Micro Finance InstitutionsMicro Finance Institutions
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Financial InclusionFinancial Inclusionthe process of ensuring access to financial services and timely andthe process of ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups such asadequate credit where needed by vulnerable groups such as
weaker sections and low income groups at an affordable costweaker sections and low income groups at an affordable cost
These services are:These services are:
(i) a no-frills banking account for making and receiving(i) a no-frills banking account for making and receiving
payments,payments,
(ii) a savings product suited to the pattern of cash flows of(ii) a savings product suited to the pattern of cash flows of
a poor household,a poor household,
(iii) money transfer facilities,(iii) money transfer facilities,
(iv) small loans and overdrafts for productive, personal(iv) small loans and overdrafts for productive, personal
and other purposes,and other purposes,
(v) micro-insurance (life and non-life)(v) micro-insurance (life and non-life)
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C Rangarajan Committee on FinancialC Rangarajan Committee on FinancialInclusionInclusion
There is a need to recognize a separate category of MicrofinanceThere is a need to recognize a separate category of Microfinance
Non Banking Finance Companies (MFNBFCs) Non Banking Finance Companies (MFNBFCs)
Opening of specialised microfinance branches / cells in potentialOpening of specialised microfinance branches / cells in potential
urban centers for exclusively catering to microfinance andurban centers for exclusively catering to microfinance and
SHG - bank linkages requirements of the urban poor.SHG - bank linkages requirements of the urban poor.
An enabling provision be made in the NABARD Act, 1981An enabling provision be made in the NABARD Act, 1981
permitting NABARD to provide micro finance services to thepermitting NABARD to provide micro finance services to the
urban poor .urban poor .
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Functioning of Micro FinancialFunctioning of Micro Financial
InstitutionsInstitutions
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Regulatory framework of Micro FinancialRegulatory framework of Micro FinancialInstitutionsInstitutions
Current estimates of the number of NGOsCurrent estimates of the number of NGOs
engaged in providing microfinance servicesengaged in providing microfinance services
to the poor exceed 1,000 organisationsto the poor exceed 1,000 organisations
More than 1000 MFIs are there in India today,More than 1000 MFIs are there in India today,
among which 400-500 continue to operate inamong which 400-500 continue to operate inthe form of registered societies or trusts,300-the form of registered societies or trusts,300-
400 MFIs operate as cooperatives400 MFIs operate as cooperatives
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Role of MFI s in MSME s Role of MFI s in MSME s
MFIs offer micro credit toMFIs offer micro credit to
borrowersborrowers
MFIs lend to MSMEsMFIs lend to MSMEs
7% contribution by MFIs7% contribution by MFIs
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CURRENT SCENARIOCURRENT SCENARIO
3 Million MSME( 50% of Industrial3 Million MSME( 50% of Industrial
Output & 42% of Total Exports)Output & 42% of Total Exports)
1000 MFI1000 MFI
Micro lenders increased to 60% inMicro lenders increased to 60% in
2008-20092008-2009
SMERA MFI RatingSMERA MFI Rating
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Problems faced by MFIsProblems faced by MFIs
Lack of fundsLack of funds
Financial exclusionFinancial exclusion
Unable to meet the needs ofUnable to meet the needs of
clientsclients
Interest ratesInterest rates
Service taxesService taxes
Not able to access tax refundsNot able to access tax refunds
Lack of trained labor andLack of trained labor and
mobilization of resourcesmobilization of resources
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SuggestionsSuggestionsBuilding sustainable MFIs in India:Building sustainable MFIs in India:
NBFC status Allows MFIs to be regulated by RBINBFC status Allows MFIs to be regulated by RBI Bigger is betterBigger is better
FlexibilityFlexibility
Tax concessionsTax concessions
Use of MISUse of MIS
Permitting MFIs to take deposits from members/borrowersPermitting MFIs to take deposits from members/borrowers
Simplify foreign investment regulations to enable MFIs toSimplify foreign investment regulations to enable MFIs to
raise foreign equityraise foreign equity
Emerging trends in MFIs in relation to HRM:Emerging trends in MFIs in relation to HRM:
Separation of HRM as a key functionSeparation of HRM as a key function
Recruiting professionalsRecruiting professionals
Focus on induction and orientationFocus on induction and orientation
Training and grooming field staffTraining and grooming field staff
Incentive-based salariesIncentive-based salaries
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Suggestions ContdSuggestions Contd
Financial sustainability can beFinancial sustainability can beachieved through:achieved through:
Controlling CostsControlling Costs
- Reducing Average Cost of- Reducing Average Cost of
FundsFunds
- Reducing Cost of Operations- Reducing Cost of Operations
- Reducing Cost of Bad Debts- Reducing Cost of Bad Debts Increasing VolumesIncreasing Volumes
Increasing Services Savings andIncreasing Services Savings and
InsuranceInsurance
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