Sources of Micro Finance in India

Prepared By:
Deepak Kumar (09880003912) Ahmad Farhaan (10080003912) Bhavna Kashyap (10180003912) Kapil Yadav (10380003912) Amit Rawat (10280003912) Nishant Mann (09980003912)

Objectives of the Study

To study the importance and role of microfinance in poverty alleviation and Profitable agriculture activities. To analyze the economic gains derived by the members after joining the micro finance institutions. To analyze the operating system of MFIs for the mobilization of saving, delivery of credit to the needy, management of group funds and repayment of loans.

Introduction
Meaning of micro finance:
Microfinance is usually understood to entail the provision of financial services to microentrepreneurs and small businesses, which lack access to banking and related services due to the high transaction costs associated with serving these client categories. The two main mechanisms for the delivery of financial services to such clients are (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

Microfinance is a broad category of services, which includes microcredit. Microcredit is provision of credit services to poor clients. Although microcredit is one of the aspects of microfinance, conflation of the two terms is endemic in public discourse. Critics often attack microcredit while referring to it indiscriminately as either 'microcredit' or 'microfinance'. Due to the broad range of microfinance services, it is difficult to assess impact, and very few studies have tried to assess its full impact. Proponents often claim that microfinance lifts people out of poverty, but the evidence is mixed.

The term "microfinance," once associated almost exclusively with small-value loans to the poor, is now increasingly used to refer to a broad array of products (including payments, savings, and insurance) tailored to meet the particular needs of low-income individuals. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.

Poor people usually address their need for financial services through a variety of financial relationships, mostly informal. Credit is available from informal moneylenders, but usually at a very high cost to borrowers. Savings services are available through a variety of informal relationships like savings clubs, rotating savings and credit associations, and other mutual savings societies. But these tend to be erratic and somewhat insecure. Traditionally, banks have not considered poor people to be a viable market.

Different types of financial services providers for poor people have emerged - nongovernment organizations (NGOs); cooperatives; community-based development institutions like self-help groups and credit unions; commercial and state banks; insurance and credit card companies; telecommunications and wire services; post offices; and other points of sale - offering new possibilities.

These providers have increased their product offerings and improved their methodologies and services over time, as poor people proved their ability to repay loans, and their desire to save. In many institutions, there are multiple loan products providing working capital for small businesses, larger loans for durable goods, loans for childrens education and to cover emergencies. Safe, secure deposit services have been particularly well received by poor clients, but in some countries NGO microfinance institutions are not permitted to collect deposits.

History of microfinance
Over the past centuries practical visionaries, from the Franciscan monks who founded the community-oriented pawnshops of the 15th century, to the founders of the European credit union movement in the 19th century (such as Friedrich Wilhelm Raiffeisen) and the founders of the microcredit movement in the 1970s (such as Muhammad Yunus) have tested practices and built institutions designed to bring the kinds of opportunities and riskmanagement tools that financial services can provide to the doorsteps of poor people. While the success of the Grameen Bank (which now serves over 7 million poor Bangladeshi women) has inspired the world, it has proved difficult to replicate this success. In nations with lower population densities, meeting the operating costs of a retail branch by serving nearby customers has proven considerably more challenging. Hans Dieter Seibel, board member of the European Microfinance Platform, is in favor of the group model. This particular model (used by many Microfinance institutions) makes financial sense, he says, because it reduces transaction costs. Microfinance programmes also need to be based on local funds.

The history of micro financing can be traced back as long to the middle of the 1800s when the theorist Lysander Spooner was writing over the benefits from small credits to entrepreneurs and farmers as a way getting the people out of poverty. Independently to Spooner, Friedrich Wilhelm Raiffeisen founded the first cooperative lending banks to support farmers in rural Germany.

The modern use of the expression "micro financing" has roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer Muhammad Yunus, were starting and shaping the modern industry of microfinancing. Another pioneer in this sector is Akhtar Hameed Khan.

Importance of Micro Finance

According to the latest research done by the World Bank, India is home to almost one third of the worlds poor (surviving on an equivalent of one dollar a day). Though many central government and state government poverty alleviation programs are currently active in India, microfinance plays a major contributor to financial inclusion. In the past few decades it has helped out remarkably in eradicating poverty. Reports show that people who have taken microfinance have been able to increase their income and hence the standard of living. About half of the Indian population still doesnt have a savings bank account and they are deprived of all banking services. Poor also need financial services to fulfill their needs like consumption, building of assets and protection against risk. Microfinance institutions serve as a supplement to banks and in some sense a better one too. These institutions not only offer micro credit but they also provide other financial services like savings, insurance, remittance and non-financial services like individual counseling, training and support to start own business and the most importantly in a convenient way. The borrower receives all these services at her/his door step and in most cases with a repayment schedule of borrowers convenience.

There are certain advantages such as:

1. Credit to Rural Poor:Usually rural sector depends on non-institutional agencies for their financial requirements. Micro financing has been successful in taking institutionalized credit to the doorstep of poor and have made them economically and socially sound. 2. Poverty Alleviation:Due to micro finance poor people get employment. It also helps them to improve their entrepreneurial skills and encourage them to exploit business opportunities. Employment increases income level which in turn reduces poverty. Women Empowerment:Normally more than 50% of SHGs are formed by women. Now they have greater access to financial and economical resources. It is a step towards greater security for women. Thus microfinance empowers poor women economically and socially. Economic Growth:-

3.

4.

Finance plays a key role in stimulating sustainable economic growth. Due to microfinance, production of goods and services increases which increases GDP and contributes to economic growth of the country. 5. Mobilization of Savings:Microfinance develops saving habits among people. Now poor people with meagre income can also save and are bankable. The financial resources generated through savings and micro credit obtained from banks are utilized to provide loans and advances to its members. Thus microfinance helps in mobilization of savings. Development of Skills:Micro financing has been a boon to potential rural entrepreneurs. SHGs encourage its members to set up business units jointly or individually. They receive training from supporting institutions and learn leadership qualities. Thus micro finance is indirectly responsible for development of skills. Mutual Help and Cooperation:Microfinance promotes mutual help and cooperation among members. The collective efforts of group promote economic interest and helps in achieving socio-economic transition. Social Welfare With employment generation the level of income of people increases. They may go for better education, health, family welfare etc. Thus micro finance leads to social welfare or betterment of society.

6.

7.

8.

Why Micro Finance

Traditionally, banks have not provided financial services, such as loans, to clients with little or no cash income. Banks incur substantial costs to manage a client account, regardless of how small the sums of money involved. For example, although the total gross revenue from delivering one hundred loans worth $1,000 each will not differ greatly from the revenue that results from delivering one loan of $100,000, it takes nearly a hundred times as much work and cost to manage a hundred loans as it does to manage one. The fixed cost of processing loans of any size is considerable as assessment of potential borrowers, their repayment prospects and security; administration of outstanding loans, collecting from delinquent borrowers, etc., has to be done in all cases. There is a break-even point in providing loans or deposits below which banks lose money on each transaction they make. Poor people usually fall below that breakeven point. A similar equation resists efforts to deliver other financial services to poor people. In addition, most poor people have few assets that can be secured by a bank as collateral. As documented extensively by Hernando de Soto and others, even if they happen to own land in the developing world, they may not have effective title to it. This means that the bank will have little recourse against defaulting borrowers. Seen from a broader perspective, the development of a healthy national financial system has long been viewed as a catalyst for the broader goal of national economic development .However, the efforts of national planners and experts to develop financial services for most people have often failed in developing countries. Because of these difficulties, when poor people borrow they often rely on relatives or a local moneylender, whose interest rates can be very high. An analysis of 28 studies of informal money lending rates in 14 countries in Asia, Latin America and Africa concluded that 76% of moneylender rates exceed 10% per month, including 22% that exceeded 100% per month. Moneylenders usually charge higher rates to poorer borrowers than to less poor ones. While moneylenders are often demonized and accused of usury, their services are convenient and fast, and they can be very flexible when borrowers run into problems. Hopes of quickly putting them out of business have proven unrealistic, even in places where microfinance institutions are active. Although much progress has been made, the problem has not been solved yet, and the overwhelming majority of people who earn less than $1 a day, especially in the rural areas, continue to have no practical access to formal sector finance. Microfinance has been growing rapidly with $25 billion currently at work in microfinance loans. It is estimated that the industry needs $250 billion to get capital to all the poor

people who need it. The industry has been growing rapidly, and concerns have arisen that the rate of capital flowing into microfinance is a potential risk unless managed well.

Evolution
The beginning of the micro finance movement in India could be traced to the self-help group (SHG) - bank linkage program (SBLP) started as a pilot project in 1992 by National Bank for Agricultural and Rural Development (NABARD). This program not only proved to be very successful, but has also emerged as the most popular model of micro finance in India. Other approaches like micro finance institutions (MFIs) also emerged subsequently in the country. Recognizing the potential of micro finance to positively influence the development of the poor, the Reserve Bank, NABARD and Small Industries Development Bank of India (SIDBI) have taken several initiatives over the years to give a further fillip to the micro finance movement in India. Microfinance India is a national level advocacy platform, initiated by ACCESS Development Services, spurned off to ACCESS-ASSIST, to engage various stakeholders and develop a comprehensive vision for the entire sector. Indian microfinance remains a diverse and complex arena with its array of products and methodologies. Microfinance India seeks to promote the distinct voices of those associated with the field regulators, policy makers, government, banks, insurance companies, MFIs, donors, academicians, SHPIs etc. The sector has matured and expanded its ambit of stakeholders - attracting new entrants such as rating agencies and social equity investors. Cumulatively, these new players, their financial instruments, delivery models, and technology platforms - emphasize the need for an expanded understanding of the arena and all its associated contributors. Microfinance India Summit, starting under the aegis of CARE, ACCESS and now ACCESS ASSIST has become the most significant platform for the future visioning of Indias microfinance sector. ACCESS - ASSIST is a public charitable trust whose overall mandate is to work at all levels of the financial value chain, on one hand to organize the demand on the ground and on the other hand to engage with supply side actors and catalyze greater flow of funds to the poor. The three tier strategy of ASSIST has allowed focusing on micro and macro issues, gaps and needs of the Indian Microfinance sector, with. The aim is to incubate new institutions to enable their self-sufficiency and self-sustainability under specialized technical assistance. . to cater to varied demands of the growing microfinance sector through streamlined and structured services to emerging MFIs and supporting the enabling environment through the Microfinance India platform.. To optimize its resources and maximize the results of its interventions, ACCESS ASSIST believes in partnering with key stakeholders in the sector in order to develop mutually reinforcing strategies, bring convergence of competencies and build consensus on key issues.

Micro Finance Institutions in India

Anisha Microfin Association (Anisha Microfin) Ankuram Sangmam Poram(ASP) Annapurna Financial Services Private Limited (Trident Microfinance) Arohan Financial Services Ltd.(Arohan) Asmitha Microfin Ltd. Asomi Bandhan Bazaari Global Finance Limited Bharat Integrated Social Welfare Agency (BISWA) Bharti Integrated Rural Development Society (BIRDS) Bhartiya Samruddhi Finance Limited (BASIX) Cashpor Microcredit Centre for Rural Reconstruction through Social Action (CReSA) Equitas Micro Finance India Evangelical Social Action Forum (ESAF) Gram-Utthan Grama Vidiyalhttp Grameen Koota Growing Opportunity Finance (GOF) Indian Association for Savings and Credit (IASC)

 Indian Cooperative Network for Women (ICNW) Kotalipara Development Society Mahashakti Foundation Mann Deshi Mahila Sahakari Bank Ltd (MDMSB) Microcredit Foundation of India Mimo Finance Network of Entrepreneurship& Economic Development (NEED) Nirmaan Bharati Saadhana Microfin Society Sahara Uttarayan Samasta Microfinance Ltd Samrudhi MicroFin Society Sanghamithra Rural Financial Services Sarala Women Welfare Society Sharada`s Women`s Association for Weaker Section Share Microfin Limited Shri Kshetra Dharmasthala Rural Development Project (SKDRDP) Shri Mahila Sewa Sahakari Bank Ltd (SEWA Bank) SKS Microfinance Private Limited Spandana Sphoorty Financial Limited Swayam Krishi Sangam(SKS) Tamil Nadu Corporation for Development of Women Ltd Ujjivan Financial Services (P) Limited UpLift India Association

Current scenario in India

THE PROFILE OF MICRO FINANCE IN INDIA

The Scenario 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 is estimated to be about Rs. 60,000 crores. Only about 5 % of rural people have access to micro finance.

1 Progress under microfinance during 2011-12

1.1 An update on micro Finance as at the end of March 2012 is being presented in 3 different sections. The progress under the SHG-Bank linkage programme has been covered in the first part, while the activities of mFIs has been covered in the second part. Various innovative initiatives and support services like capacity building of all stakeholders of micro Finance programme etc. is covered in the third part. Maps detailing SHG coverage ratio in ten priority States is covered in the final part. More detailed statistical information on the progress of these activities have been presented at the end of the report. SHG-Bank Linkage Programme Detailed analysis of the SHG-Bank Linkage Programme across the geographical spread of the country and across the financing agencies is being presented in this section. The analysis covers the broader

components of the programme, namely inclusive growth, savings, loans and the recovery performance. Table-1 gives the growth of SHGs saving as well as credit linkedfor the last 3 years, separately for all Groups, Groups formed under SGSY and exclusive Women Groups. 1.2 Under the SHG-Bank linkage programme, over 103 million rural households have now access to regular savings through 7.96 million SHGs linked to banks. About 27% of these SHGs are savings linked through the SGSY programme the rural poverty alleviation programme of the Government of India where predominantly households below the poverty line are admitted as members. There has been a decline in the amount of savings balance with banks to the extent of 6.7% as compared to the previous year although the number of SHGs saving linked has shown a growth of 6.7% during the year. This decline is almost entirely attributable to the groups formed under SGSY where the decline was to the extent of 23.2%. Increasing awareness at the SHG level about the advantage of using the savings for internal loaning is also partly responsible for the decline in saving balance with banks. The number of saving linked SHGs now stands at 7.96 million with a membership of over 103 million poor households. While bulk of these savings is used for internal lending within the Group (over 70%), the balance is maintained in the savings accounts with the financing banks. Over 79% of SHGs linked to banks are exclusive women groups, which is one of the most distinguishing features of microfinance sector in the country. The balance in the savings accounts of the banks as at the end of March 2012 stood at `6551.41 crore. Among the major States, Karnataka SHGs maintain the highest S.B. balance of over `16000 per SHG followed by Punjab of nearly `12500 per SHG. Among the regions, southern region is highest at `10080 per SHG and northeastern region recorded the lowest balance of `4159 per SHG. On an average, the SHGs maintain a balance of `8230. Commercial Banks account for 58% of the savings account maintained by SHGs and RRBs 27% and Cooperative Banks the remaining 15%.

Table-1: Overall Progress under SHG-Bank Linkage for last 3 years

(Amount ` in crore/ Numbers in lakh)

Particulars
Total SHGs SHG Savings with Banks as on 31st March Of which SGSY Groups

2009-10 No. of Amount SHGs

69.53 (13.6%)
16.94 (12.5%) 24.4

2010-11 No. of Amount SHGs

74.62 (7.3%)
20.23 (19.4%) 27.1

2011-12 No. of Amount SHGs

79.60 (6.7% )
21.23 (5.0%) 26.7

6198.7 1 (11.8% )
1292.62 (-17.3%) 20.9

7016.3 0 (13.2% )
1817.12 (40.6%) 25.9

6551.4 1 (-6.7%)
1395.25 (-23.2%) 21.3

% of SGSY Groups to Total

All women SHGs % of Women Groups Loans Disbursed to SHGs during the year
Total SHGs

53.10 (9.18%) 76.4 15.87 (-1.4%)

4498.66 (1.46%) 72.6 14453.3 (17.9%)

60.98 (14.8%) 81.7 11.96 (-24.6%)

5298.65 (17.8%) 75.5 14547.7 3 (0.01) 2480.37 (12.8%)

62.99 (3.3%) 79.1 11.48 (-4%)

5104.33 (-3.7%) 77.9 16534.7 7 (13.7%) 2198 (9.1%)

Of which SGSY Groups

2.67 (1.0%)

2643.56 (6.6%)

2.10 (-12.9%)

2.41 (9.9%) 18.3 9.23 (9.2%) 80.4 43.54 (9.0%) 12.16 (5.4%) 27.9 36.49 (8.4%) 83.8

% of SGSY Groups to Total 16.9 12.94 All women SHGs

15.2 12429.3 7 (18.1%) 86 28038.2 8 (23.6%) 6251.08 (6.6%)

20.1 10.17 (-21.4%)

17.0 12622.3 3 (1.6%) 86.8 31221.1 7 (11.4%) 7829.39 (25.2%)

16.0 14132.0 2 (12.0%) 85.5 36340.0 0 (16.4%) 8054.83 (2.9%)

(5.8%)

% of Women Groups
Total SHGs Loans Outstanding against SHGs as Of which SGSY Groups on 31st March

81.6 48.51 (14.8%)

85 47.87 (-1.3%)

12.45 (27.5%)

12.86 (3.4%)

% of SGSY Groups to Total 25.7 38.98 All women SHGs

22.3 23030.3 6 (23.9%) 82.1

26.9 39.84 (2.2%)

25.1 26123.7 5 (13.4%) 83.7

22.2 30465.2 8 (16.6%) 83.8

(18.9%)

% of Women Groups

80.3

83.2

Source: Status of Micro Finance in India 2011-2012 NABARD Report.

Fig.1 shows a graphical presentation of the savings, fresh loans and the loan outstanding of SHGs with Banks for the last 4 years.

Fig.1 SHGs as on 31.3.2012 Savings and Credit

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Fig.2 : Saving Linked

SHGs(Number) :Agency wise

Fig.3 : Average Savings Balance of SHGs with Banks- region wise

Source: Status of Micro Finance in India 2011-2012 NABARD Report.

Further, over 4.36 million SHGs have now access to direct credit facilities from the banks and the total bank loans outstanding against these groups is over `36340 crore as on 31 March 2012 i.e. an average of `83500 per group. About 1.15 million SHGs were extended fresh loans to the extent of`16535 crore during 2011-12 by all banks averaging `1.44 lakh per group. Although fresh lending to SHGs during the year showed an increase of 13.7% over last year, the steady decline in the number of SHGs being extended fresh loans by banks for the last 3 years is a matter of concern. Number of SHGs having outstanding loans with banks is also showing a decline partly due to the continued decline in the number of SHGs being extended fresh loans by banks for the last 3 years. Statement I-A to I-E appended indicate the overall progress under the SHG-Bank and mFI-Bank Linkage Programme as on 31.3.2012. 1.3 While the quantum of fresh loans issued to SHGs by banks rose by 13.7% during the year to `16535 crore (to 11.48 lakh SHGs) as against `14548 crore disbursed last year (to 11.96 lakh SHGs), the number

of SHGs obtaining fresh loans from banks during the year declined by 4%. What causes more concern is the fact that the number has been declining during the last 3 years, though the rate of decline has come down from nearly 24% last year to 4% this year. Kerala, West Bengal and Odissa reported maximum decline in the number of SHGs being extended fresh loans during the year. The average size of fresh loans extended ranged from `1.80 lakh per SHG in the southern region (`1.5 lakh last year) to `0.75 lakh in the western region (the lowest average was`0.65 lakh for eastern region last year). The average loan size across the regions was `1.44 lakh per SHG. Considering that on an average 80% of the SHG members avail loan at a time, the average per member loan issued works out to `14000. Among the financing banks, Commercial Banks and RRBs extended loan of `1.65 lakh on an average per SHG while cooperative Banks lent `0.65 lakh only per SHG. While Commercial Banks accounted for 63% of the savings balance of SHGs, their share in fresh lending to SHGs was only 60% whereas RRBs with a Savings share of only 20% accounted for 30% of the fresh loans issued during the year. This is suggestive of cautious attitude of the Commercial Banks in lending for SHGs as compared to RRBs.

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Fig: 4: Loans Issued to SHGs during 2011-12 Statements II B and Statement IV indicate the Bank wise and State wise position of fresh lending to SHGs by banks during 2011-12

1.4 The number of SHGs having loans outstanding against them from banks declined by 9% during the year to 43.54 lakh as against 47.87 lakh last year although the quantum of loans outstanding increased to `36340 crore (16.4% increase over last year). Partly the decline can be attributed to the continued decline

in the number of SHGs being extended fresh loans by banks over the last 3 years. All states except Karnataka, Himachal Pradesh and Puducherry in the southern region recorded decline in the number of SHGs having outstanding loans. Average amount of loan outstanding ranged from `47000 per SHG in eastern and western region to `1.08 lakh in the southern region. The average loan outstanding across the regions works out to `0.83 lakh per SHG. Among the States, all southern states averaged about `1.07 lakh (Karnataka being the highest at `1.30 lakh per SHG) or above per SHG while Gujarat recorded the lowest average of ` 24000 per SHG. Among the agencies, Commercial Banks had an average outstanding loan of `1 lakh per SHG while RRBs had `0.67 lakh and Cooperative Banks `0.43 lakh. Considering that substantial portion (nearly 70%) of the savings from the members of SHGs also goes for internal lending besides the outstanding credit from the banks ; the total pooled resources outstanding at the members level can be pegged at over `51000 crore.

Fig.5 : Details of credit Linked SHGs

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Statement II C and Statement V indicate the Bank wise and State wise position of the loans outstanding against the SHGs as on 31 March 2012.

1.5 The increase in NPA against loans to SHGs continued to escalate during the current year as well. In absolute terms, the gross NPA against loans to SHGs increased from `1474 crore at the end of March 2011 to `2213 crore by March 2012. In percentage terms it increased from 4.72% last year to 6.09% during the current year. It was only 2.9% during 2009-10. This is a matter of concern for the microfinance sector and the causes for the declining performance of recovery are to be analyzed and remedial action initiated urgently. The total gross NPA against loans to SHGs stood at `2212.74 crore as on 31.3.2012 against the total outstanding loan of `36340 crore. Among the regions, southern region with a NPA of 4.98% (3.79% last year) was the lowest while Central Region with an alarming 13.2% (10.7% last year) was the highest. What causes grave concern is the high NPAs in major states like Uttar Pradesh (12.5%), Odissa (11.9%), Tamil Nadu (9.6%) and Kerala(9%). Table 2 and 3 illustrate the comparative position of NPAs against loans to SHGs by banks during the last 3 years while Fig 6 and 7 gives the graphical presentation of the NPA position.

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Fig.6 : NPA Position against Loans to SHGs

Fig.7 : Percentage of NPAs to Loans Outstanding against SHGs

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Statement II-D and Statement VI indicate the NPA position bank wise and state wise as on 31.3.2012.

Fact sheet Priority States

CHHATTISGARH : SHG coverage ratio

Green

Above 80%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Yellow Between 50%-80% <50%

Red

JHARKHAND : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

BIHAR: SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

UTTAR PRADESH : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

MADHYA PRADESH : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

RAJASTHAN : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

ODISHA : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

WEST BENGAL : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

MAHARASHTRA : SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

UTTARAKHAND: SHG coverage ratio

Green

Above 80%

Yello w Red

Between 50%-80% <50%

Source: Status of Micro Finance in India 2011-2012 NABARD Report

Indian Scenario

Features of Indian Microfinance

About 60% of the microfinance institutions are registered as Societies. About 20% are Trusts. About 65% of microfinance institution follows the model of SHGs. Large concentration of microfinance institution is in the South India.
A total of 600 microfinance institution together have a reach of around 1.25 crore poor

households

Benefits of microfinance
Self employment Empowers women Creates long term financial independence Increased likelihood of educating ones children Increased food security Investment opportunities Reduce the impact of disasters

Major achievements in microfinance

Over 10 million people reached Rs 8 billion in saving mobilized Rs 20 billion & over 95% on time repayment rate on these loans Poor, especially women , have emerged as creditworthy clients, enabling microfinance service delivery at low transaction costs without relying on physical collateral .

 Microfinance services have strengthened the social and human capital of the poor , at the household, enterprise and community level . Continuous developments in microfinance policies, practices and institutions . Microfinance services have triggered a process toward the broadening and deepening of rural financial markets .

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 crores to about 42000 crores.

Challenges Ahead

Appropriate legal structures for the structured growth of MF operations. Ability to access loan funds at reasonably low rates of interest. Ability to attract and retain professional and committed human resources. Design of apt MIS including user friendly software for tracking accounts and operations.

 Ability to innovate, adapt and grow. Bring out a compendium of small and micro enterprises for the MF clients. Identify and prepare a panel of locally available trainers. Ability to train trainers. Capacity to provide backward linkages or create support structures for marketing.