Professional Documents
Culture Documents
A PROJECT REPORT ON
Submitted by
MANPREET KAUR
MBA 2nd semester
UNI ROLL NO. 1174126
In the partial fulfillment for the award of the
degree of
MASTERS IN BUSINESS ADMINISTRATION
DECLARATION
I am sincerely thankful to all those people who have been giving
me any kind of assistance in the making of this project report. I
express my gratitude to Ms MANPREET KAUR, who has through
her vast experience and knowledge has been able to guide me,
both ably and successfully towards the completion of the project. I
express my gratitude, IMS-BHADDAL. I would hereby, make most
of the opportunity by expressing my sincerest thanks to all my
faculties whose teachings gave me conceptual understanding and
clarity of comprehension, which ultimately made my job more
easy. Credit also goes to all my friends whose encouragement
kept me in good stead. Their continuous support has given me the
strength and confidence to complete the project without any
difficulty.
ACKNOWLEDGEMENT
I gratefully acknowledgement the guidance and encouragement
given to me by Ms MANPREET KAUR whose invaluable suggestions
and constructive criticism helped me to enhance the project work.
She deserves a special compliment for her guidance.
I thank my institute who provided me this opportunity to undergo
this project in a particular field.
Manpreet kaur
MBA 2nd semester
Uni. Roll no- 1174126
LIST OF TABLES
S.NO
1
TABLE NO.
PAGE NO
21
of Microfinance
Distribution of
28-29
Indebted Rural
Households: Agency
3
wise
Legal Forms of MFIs
36
in India
Comparative
49
LIST OF FIGRUES
4
S.NO
1
FIG. NO
Development
PAGE NO.
23
process through
2
microfinance
Micro finance
interventions
through different
organizations
24
TABLE OF CONTENTS
S.NO
1
TITLE NAME
CHAPTER NO.1
Introduction
The History of
Modern
Microfinance
Who are the
clients of micro
finance?
Principles of
micro finance
Role of
Microfinance
Difference
between micro
credit and
microfinance
Financial needs
and Financial
services
Activities in
Microfinance
Governments
role supporting
microfinance
Microfinance
6
PAGE NO
9-29
changing the
face of poor
India
Microfinance
Social Aspects
2
CHAPTER NO.2
30-31
Objectives of
3
microfinance
CHAPTER NO.3
32-33
Research
4
methodology
CHAPTER NO.4
Data analysis and
interpretation
Legal forms of
MFIs in India
Microfinance
Providers
Service
Company
Model
Microfinance
Strategic
Strategic Policy
Initiatives
Microfinance
Management
7
34-66
Microfinance
Working
Environment
SWOT MATRIX
Role, Functions
and Working
Mechanism of
Financial
Institutions
Marketing of
Microfinance
5
Products
CHAPTER NO.5
Recommendations,
suggestions and
conclusion
CHAPTER NO. 6
Bibliography
67-77
78-79
CHAPTER NO. 1
INTRODUCTION
capacity
building,
and
agricultural
business
Microfinance Definition
11
is
buzzing
word,
used
when
financing
for
micro
13
ACCION International
This institution had been established by a law student of Latin
America to help the poor people residing in the rural and urban
areas of the Latin American countries. It is one of the most
important microfinance institutions of the world. Its network of
lending partner comprises not only Latin America but also US and
Africa.
SEWA Bank
In 1973, the Self Employed Women's Association (SEWA) of
Gujarat (in India) formed a bank, named as Mahila SEWA
Cooperative Bank, to access certain financial services easily.
Almost 4 thousand women contributed their share capital to form
the bank. Today the number of the SEWA Bank's active client is
more than 30,000.
GRAMEEN Bank
Credit unions and lending cooperatives have been around
hundreds
of
years.
However,
the
pioneering
of
modern
15
16
are
typically
self-employed,
often
household-based
17
credit might have a far more limited market scope than say a
more diversified range of financial services, which includes
various types of savings products, payment and remittance
services, and various insurance products. For example, many very
poor farmers may not really wish to borrow, but rather, would like
a safer place to save the proceeds from their harvest as these are
consumed over several months by the requirements of daily
living. Central government in India has established a strong &
extensive link between NABARD (National Bank for Agriculture &
Rural
Development), State Cooperative Bank, District Cooperative
Banks, Primary Agriculture & Marketing Societies at national,
state, district and village level.
raise
income,
build
up
assets
and/or
cushion
18
Donor
funds
should
complement
private
capital,
not
Role of Microfinance
The micro credit of microfinance prename was first initiated in the
year 1976 in Bangladesh with promise of providing credit to the
poor without collateral ,alleviating poverty and unleashing human
creativity and endeavor of the poor people. Microfinance impact
studies have demonstrated that:
1. Microfinance helps poor households meet basic needs and
protects them against risks.
2. The use of financial services by low-income households
leads to improvements in household economic welfare and
enterprise stability and growth.
3. By
supporting
womens
economic
participation,
19
Difference
between
micro
credit
and
microfinance
Micro credit refers to very small loans for unsalaried borrowers
with little or no collateral, provided by legally registered
institutions. Currently, consumer credit provided to salaried
workers based on automated credit
Scoring is usually not included in the definition of micro credit,
although this may change. Microfinance typically refers to micro
credit, savings, insurance, money transfers, and other financial
products targeted at poor and low-income people.
20
injury,
23
Activities in Microfinance
Micro credit
It is a small amount of money loaned to a client by a bank or
other institution. Micro credit can be offered, often without
collateral, to an individual or through group lending.
Micro savings
These are deposit services that allow one to save small amounts
of money for future use. Often without minimum balance
requirements, these savings accounts allow households to save in
order to meet unexpected expenses and plan for future expenses
Micro insurance: It is a system by which people, businesses and
other organizations make a payment to share risk. Access to
insurance
enables
entrepreneurs
to
concentrate
more
on
Remittances
These are transfer of funds from people in one place to people in
another, usually across borders to family and friends. Compared
with other sources of capital that can fluctuate depending on the
political or economic climate, remittances are a relatively steady
source of funds.
Product Design
24
The starting point is: how do MFIs decide what product s to offer?
The actual loan products need to be designed according to the
demand of the target market. Besides the important question of
what risks to cover, organizations also have to decide whether
they want to bundle many different benefits into one basket
policy, or whether it is more appropriate to keep the product
simple. For marketing purposes, MFIs sometimes prefer the
basket
cover,
since
it
can
make
the
policies
sound
Financial
Other Financial
Non Financial
Services
Services
Services
Micro-insurance, Life
Small Credit,
Insurance, Health
Sanitation
Small Business
Education, Financial
Credit.
Housing, Education,
Education,
Health.
Micro-entrepreneur
1. Credit Services
Training.
2. Deposit
Services
Voluntary
Savings
25
Services,
Mandatory
Savings.
26
27
to
lower
costs
microfinance.
Fig no.1
28
and
interest
rates
and
in
29
Fig no.2
30
by
Self
Help
Groups
(SHGs)
Banks
linkage
with
technical
assistance,
and
agricultural
business
31
industries,
construction
and
transport.
This
33
34
Womens
indicators
of
empowerment
through
microfinance:
banking
transactions
Skills for income generation
Decision making within the household
Group mobilization in support of individual clients- action on.
Table no.2 Distribution of Indebted Rural Households: Agency wise
Credit Agency
Percentage of rural
households
35
Government
Cooperative societies
Commercial banks
insurance
Provident fund
Other institutional sources
All institutional agencies
landlords
Agricultural money lenders
Professional money lenders
Relatives and friends
others
All non institutional agencies
All non agencies
6.1
21.6
33.7
0.3
0.7
1.6
64.0
4.0
7.0
10.5
5.5
9.0
36.0
100.0
36
CHAPTER NO.2
OBJECTIVES OF MICRO
FINANCE
37
38
CHAPTER NO.3
RESEARCH METHODOLOGY
39
Definition
Descriptive research means to describe something such as
market characteristics or functions.
The data I would be using secondary data. The data is already
listed and I would be properly arranging it as per my research
topic.
I will be listing the following topics:
Proper descriptions of suggestions
Relevant and adequate data analysis
Data analysis method would be appropriate.
Reliability and validity of the data would be checked
40
CHAPTER NO.4
DATA ANALYSIS AND
INTERPRETATION
42
Types of MFIs
Estimated
Number
which Registered
400 to 500
10
Societies
Registration Act,
b.) Non-profit
1860 or similar
Companies
Provincial Acts
Indian Trust Act, 1882
Section 25 of the
Companies Act,
2. Mutual Benefit
1956
Mutually Aided
200 to 250
MFIs
Cooperative Societies
Act
Cooperative
enacted by State
Government
similarly set
up institutions
3. For Profit MFIs
a.) Non-Banking
1956
Financial
Companies (NBFCs)
Act, 1934
Total
700 - 800
Microfinance Providers
Microfinance Institutions
A microfinance institution (MFI) is an organization that provides
microfinance
services.
MFIs
range
43
from
small
non-profit
profit
organizations
like
NGOs
(non-governmental
owned
development
and
postal
savings
banks.
An
include
apex
institutions
like
National
Bank
for
an
(CAPART),
Rashtriya
Gramin
Vikas
Nidhi
47
Other Initiatives
Micro
enterprise
Development
Programmer
(MEDP)
for
and
ultimately
fine
tuning
skills
and
by
agencies
that
have
background
and
Scheme for Capital/ Equity Support to MicroFinance Institutions (MFIs) from MFDEF
The scheme attempts to provide capital/equity support to
Micro Finance Institutions (MFIs) so as to enable them to
leverage capital/equity for accessing commercial and other
funds from banks, for providing financial services at an
affordable cost to the poor, and to enable MFIs to achieve
48
professional
fees
subject
to
maximum
of
. Microfinance Strategic
Strategic Management:
Strategic management is a field that deals with the major
intended and emergent initiatives taken by general manager
on behalf of owners, involving utilization of resources, to
enhance
the
performance
of
rams
in
their
external
environments. It entails.
and
sought
their
50
opinions
about
future
Development
and
Equity
Fund,
NABARD,
by
banks,
NGOs
and
various
government
departments.
Capacity Building
Capacity building must be tailored to meet the differing
needs
of
the
nascent/emerging
MFIs
and
of
the
thus
building
the
much
sought-after
second
tier
Microfinance Management:
Objectives
52
Innovative Methodologies
loan
size
or
by
innovating
no
conventional
process.
Absence of grant guarantee.
Staff recruitment in no conventional manner.
On the job training (each one teaches one).
Simple standard loan register along with ledger and cash
53
programmer
(2008-2011)
in
partnership
with
(LDS).
9. Shared ownership.
WEAKNESSES
1. Limited resources.
2. Micro managing.
3. Start up organization; therefore, yet to institutionalize the
standard processes.
4. Attracting/Holding on to the staff till the time we become
established players.
5. Refine the processes for growth.
OPPORTUNITIES
1. Huge Potential Market.
2. Scope of introducing livelihood related services.
55
THREATS
1.
2.
3.
4.
5.
Financial crisis.
Increasing competition.
Increasing competition.
Poor banking infrastructure.
Political instability.
Table no.4
56
57
microfinance
institutions,
and
its
outstanding
had
never
been
served
by
formal
lending
finance
ICICI Bank has taken a stake of under 20 per cent in Financial
Information Network and Operations Private Ltd (FINO),
which was launched on Thursday, July 13, 2001. FINO would
provide technological solutions as well as services to finance
providers to reach the, underserved in the country. ICICI
Bank is the lead facilitator. According to Mr Nachiket Mor,
Deputy
Managing
Director,
58
ICICI
Bank,
FINO
is
an
200
micro-finance
including
savings,
loans,
insurance,
recurring
Khera.
The
company
is
working
on
providing
institutions
(MFI)
and
non-Government
presspersons
here,
today,
Nachiket
Mor,
Madura
in
2002,
had
initiated
programme
for
address
these
constraints,
ICICI
Bank
initiated
operations
of
the
bank
by
leveraging
comparative
Securitization
Another way to enter into partnership with MFIs is to
securitize microfinance portfolios. In 2004, the largest ever
securitization deal in microfinance was signed between ICICI
Bank and SHARE Microfinance Ltd, a large MFI operating in
rural areas of the state of Andhra Pradesh. Technical
assistance and the collateral deposit of US$325,000 (93% of
the guarantee required by ICICI) were supplied by Grameen
Foundation USA. Under this agreement, ICICI purchased a
part
of
SHAREs
microfinance
portfolio
against
62
Beyond Microcredit
Microfinance does not only mean microcredit, and ICICI does
not limit itself to lending. ICICIs Social Initiative Group, along
with the World Bank and ICICI Lombard, the insurance
company set up by ICICI and Canada Lombard, have
developed Indias first index-based insurance product. This
insurance policy compensates the insured against the
likelihood of diminished agricultural output/yield resulting
from a shortfall in the anticipated normal rainfall within the
district, subject to a maximum of the sum insured. The
insurance policy is linked to a rainfall index.
Technology
One
of
the
main
challenges
to
the
growth
of
the
Chennai,
the
ICICI
Bank
Alternate
Channels
Team
in
Chennai.
Through
research,
research-based
aimed
at
understanding
and
analyzing
the
combination
of
microfinance
and
other
and
gaps
in
knowledge.
These
have
2. Bandhan
Bandhan is working towards the twin objective of poverty
alleviation and women empowerment. It started as a
Capacity Building Institution (CBI) in November 2000 under
the leadership of Mr. Chandra Shekhar Ghosh. During such
time, it was giving capacity building support to local
microfinance institutions working in West Bengal. Bandhan
opened its first microfinance branch at Bagnan in Howrah
district of West Bengal in July 2002. Bandhan started with 2
branches in the year 2002-03 only in the state of West
Bengal and today it has grown as strong as 412 branches
65
66
Operational Methodology
Bandhan follows a group formation, individual lending approach. A
group of 10-25 members are formed. The clients have to attend
the group meetings for 2 successive weeks. 2 weeks hence, they
are entitled to receive loans. The loans are disbursed individually
and directly to the members.
Loan Size
The first loan is between Rs. 1,000 Rs. 7,000 for the rural areas
and between Rs. 1,000 Rs. 10,000 for the urban areas. After the
repayment, they are entitled to receive a subsequent loan which
is Rs 1,000 - 5,000 more than the previous loan.
Service Charge
Bandhan charges a service charge of 12.50% flat on loan amount.
Bandhan initially charged 17.50%. However from 1st July 2005, it
has slashed down its lending rate to 15.00%. Then it was further
reduced to 12.50% in May 2006. The reason is obvious. As overall
productivity increased, operational costs decreased. Bandhan,
being a nonprofit organization wanted the benefit of low costs to
ultimately trickle down to the poor.
67
Monitoring System
The various features of the monitoring system are:
A 3 tier monitoring system Region, Division and Head
Office
Easy reporting system with a prescribed checklist format
Accountability at all levels post monitoring phase
Cross- checking at all the levels
The management team of Bandhan spends 90.00% of time
at the field
3. Grameen Bank
The Grameen Model which was pioneered by Prof Muhammed
Yunus of Grameen Bank is perhaps the most well known, admired
and practiced model in the world. The model involves the
following elements.
Homogeneous affinity group of five
Eight groups form a Centre
68
69
that
helps
promote
micro-finance;
SIDBI;
and
70
2. Standardize
products,
training,
and
other
week
respectively.
They
also
offer
interest
free
72
this
is
doable
model.
Under
such
an
4.Apni Mandi
Another innovation is that of The Punjab Mandi Board, which
has experimented with a farmers market to provide small
farmers located in proximity to urban areas, direct access to
consumers by elimination of middlemen. This experiment
known as "Apni Mandi" belongs to both farmers and
consumers, who mutually help each other. Under this
arrangement a sum of Rs. 5.2 lakh is spent for providing
plastic crates to 1000 farmers. Each farmer gets 5 crates at
a subsidized rate. At the mandi site, the Board provides basic
infrastructure facilities. At the farm level, extension services
of different agencies are pooled in. These include inputs
subsidies, better quality seeds and loans from Banks. Apni
Mandi scheme provides self-employment to producers and
has eliminated social inhibitions among them regarding the
retail sale of their produce.
Rural
Development
Project
(SKDRDP).
6. Bhartiya Samruddhi Finance Limited (BSFL).
7. Bandhan Society.
8. Cashpor Micro Credit (CMC).
9. Grama Vidiyal Micro Finance Pvt Ltd (GVMFL).
10.Grameen financial servicesPvt Ltd (GFSPL).
11.Madura Micro Finance Ltd (MMFL).
12. BSS Microfinance Bangalore Pvt Ltd (BMPL).
13. Equitas Micro Finance India P Ltd (Equitas).
14. Bandhan Financial Services Pvt Ltd (BFSPL).
15.Sarvodaya Nano Finance Ltd (SNFL).
16. BWDA Finance Limited (BFL).
17. Ujjivan FinancialServices Pvt Ltd (UFSPL).
18.Future Financial Services Chittoor Ltd (FFSL).
19. ESAF Microfinance & Investments Pvt. Ltd (EMFIL).
20.S.M.I.L.E Microfinance Limited.
21.SWAWS Credit Corporation India Pvt Ltd (SCCI).
22.Sanghamithra Rural Financial Services (SRFS).
23.Saadhana Micro fin.
24.Gram Utthan Kendrapara.
25. Rashtriya Seva Samithi (RASS).
26.Sahara Utsarga Welfare Society (SUWS).
27.Sonata Finance Pvt Ltd (Sonata).
28.Rashtriya Gramin Vikas Nidhi.
29. Arohan Financial Services Ltd (AFSL).
30.Janalakshmi Financial Services Pvt Ltd (JFSPL).
31.Annapurna Financial Services Pvt Ltd.
32.Hand in Hand (HiH).
33.Payakaraopeta Womens Mutually Aided Co-operative Thrift
and Credit Society (PWMACTS)
34.Aadarsha Welfare Society(AWS)
35.Adhikar
36.Village Financial Services Pvt Ltd (VFSPL)
37.Sahara Uttarayan
38.RORES Micro Entrepreneur Development Trust(RMEDT)
75
Awareness
Network (WOMAN)
42.Pragathi Mutually Aided Cooperative Credit and Marketing
Federation
Ltd(PMACS)
43.Indian Association for Savings and Credit(IASC)
44.Sewa Mutually Aided Cooperative Thrift Societies Federation
Ltd (Sewa)
45.Initiatives for Development Bangalore, Foundation (IDF)
46.Gandhi Smaraka Grama Seva Kendram (GSGSK)
47.Swayamshree Micro Credit Services (SMCS)
48. ASOMI
49.Janodaya Trust
50. Community Development Centre (CDC)
76
CHAPTER NO.5
RECOMMENDATIONS,
SUGGESTIONS AND CONCLUSION
77
For NGOs
1. The field of development itself expands and shifts emphasis
with the pull of ideas, and NGOs perhaps more readily adopt
new ideas, especially if the resources required are small,
entry and exit are easy, tasks are (perceived to be) simple
and peoples acceptance is high all characteristics (real or
presumed) of microfinance.
2. Canvassing by various actors, including the National Bank for
Agriculture
and
Rural
Development
(NABARD),
Small
(CAPART),
Rashtriya
Gramin
Vikas
Nidhi
idea
pull.
microfinance,
Induced
donor
by
NGOs
the
too
worldwide
have
been
focus
on
funding
is
tangible
and
it
is
easily
understood
by
the
policy
was
followed
by
diligent,
if
meandering,
cost
to
NGOs,
funding
agencies
and/or
the
step
towards
mainstreaming.
We
know
that
Issues in Microfinance
1.Sustainability
The first challenge relates to sustainability. MFI model is
comparatively costlier in terms of delivery of financial
82
2.Lack of Capital
The second area of concern for MFIs, which are on the
growth path, is that they face a paucity of owned funds. This
is a critical constraint in their being able to scale up. Many
of the MFIs are socially oriented institutions and do not have
adequate access to financial capital. As a result they have
high debt equity ratios. Presently, there is no reliable
mechanism
in
the
country
for
meeting
the
equity
the
dominant
valuation
methodology
in
start
ups
would
decrease
the
value
as
the
credit
delivery
and
community
mobilization
and
pilots
with
vegetable
vendors
and
farmers.
Conclusion
Microfinance has a long way despite doubts expressed and
criticism launched about its viability, impact, and poverty fighting
capacity. There should, however, be no room for complacency.
The task of building a poverty-free world is yet to be finished.
There are still over 1.2 billion people living in extreme poverty on
this planet. They are not living in one country or region but spread
all over the world. The last decade has witnessed an impressive
growth of microfinance; lack of funding is still considered a major
obstacle in the way of its growth. However, it is encouraging that
the situation is changing. Given the experiences of large and fast
growing the last decade has witnessed an impressive growth of
microfinance; lack of funding is still considered a major obstacle
in the way of its growth. However, it is encouraging that the
situation is changing. Given the experiences of large and fast
growing Microfinance, there are lessons for others who want to
increase their outreach and operate on a sustainable basis.
Fortunately, there is an increasing awareness about the power of
microfinance, and the need to support its growth. Many players
have committed themselves to its promotion. Governments are
87
88
CHAPTER NO. 6
BIBLIOGRAPHY
89
WEBSITES
www.scribd.com
www.microfinanceindia.org
www.ifmr.ac.in
www.google.com
www.forbes.com
www.nationmaster.com
www.thaindian.com
www.authorstream.com
www.knowledge.allianz.com
www.familiesinbusiness.net
www.indiamicrofinance.com
www.gdrc.org
www.slideshare.net
90