Microfinance Sector in India - PowerPoint PPT Presentation

microfinance in india ppt

Microfinance Sector in India

Financial sector initiatives Commercial Banks (ICICI, Oriental. Artisan (service & trading) (Production activities) High Coastal, Desert areas Tribal areas. – PowerPoint PPT presentation

Title: Microfinance Sector in India

PART - I

Microfinance Sector in India

PowerShow.comFree template Microfinance Sector in India Big picture
  • Huge market 350 millions
  • Present reach 15 millions
  • Estimated credit demand USD 14 billions
  • Demand met so far USD 700 millions
  • Savings potential realized but a long way to
go
  • - not matured/ sophisticated
  • Insurance services No experience, still in
  • piloting
  • Other Services Transfer, Leasing, etc. - still in
  • infancy
  • Microfinance in India Status Evolution
    • Informal Markets
    • - still very active and substantial
    • - as high as 50 to 80 share
    • Money lenders, lion share of the informal market
    • - Exploitative / predatory lending with usurious
    • interest rates 60 to 120 per annum
    • - Interest rates range between 5 and 15 times
    • more than the formal institutions
    • Formal Markets Formal Financial Institutions
    • Large branch network - 153000 retail outlets
    • Coverage One outlet per population of 7000
    • Both regulated entities / non regulated microfinance
    • entities
    Contd
    • Beginnings in 1970s (Microcredit) - with Central /
    • Federal Government initiative.
    • Involving mainstream nationalised commercial
    • banks
    • Long history of subsidised directed credit
    • programmes
    • - Integrated Rural Development Programme
    • - Differential rate of interest schemes at 4
    • (atleast 6 to 10 below the market rates)
    • Essentially supply driven with targeted approach
    5
    • Contd
    • Loan fatigue - Vitiated culture, politicized, poor
    • recovery
    • Mainstream system losing confidence in lending
    • to poor
    • High transaction cost for small and tiny loans to
    • poor
    • Since 1990s entry of NGOs for organised
    • microfinance services
    • SHG bank linkage has shown the way
    Microfinance Models
    • Broadly two track approach / models
    • Delivery model Vs Enabling model
    • NGOs as MFIs as a financial intermediary
    • NGOs as enablers as a social intermediary
    • Self-Help Groups (SHGs) emerging as a predominant
    • model
    • Focus on organising the poor as a group or a society
    • as an association of persons
    Achievements
    • Diverse approaches for outreach
    • SHG Bank linkage widely adopted approach
    • involving Bank, NGO and poor
    • Cooperatives cooperative banks for / by poor (Sewa
    • Bank, WWF, CDF)
    • Grameen replications (Cashpor, Share Microfinance,
    • Spandana)
    • Regulated MFIs for profit (Basix, IASC) delivery
    • through SHGs / JLGs
    • Non-regulated MFIs not-for-profit Sanghamithra
    • KDFS working with SHGs
    8
    • Government promoted microfinance programmes
    (Rashtriya
  • Mahila Kosh, Velugu Project, DPIP, Swashakti)
  • Large scale NGO initiatives (DHAN, Myrada, CARE)
  • Financial sector initiatives Commercial Banks (ICICI, Oriental
  • Bank of Commerce, ABN AMRO, Canara Bank, etc.)
  • and Development financial institutions (HDFC,
  • SIDBI, NABARD, etc.)
  • An outreach of 10 but still a huge number unreached
  • A supportive and enabling environment for diverse models to
  • co-exist
  • Microfinance as a focus Savings, Credit and Insurance
  • Focus on building Social Capital and Poverty

    Reduction

  • SHG Bank Linkage Model
    • FEATURES
    • Predominant model in Indian microfinance sector
    • Promising and high potential for growth and outreach
    • SHGs are informal associations of poor
    • NGO as promoter for social intermediation - forming
    • and building groups
    • Bank as financial intermediary to link finance Contd
    • ACHIEVEMENTS
    • Significant tool to organise and empower the
    • unorganized poor especially women
    • Savings potential of poor is demonstrated
    • Myths and misconception of banks broken banking
    • with poor is a business proposition
    • Banks moving from pilots to upscaling growing
    • involvement and focus
    • Low transaction cost and high repayment rates
    3 Streams of Microfinance in India
    • Demand stream
    • Forum of clients primarily poor, unorganized
    • individual clients
    • Association / organisations of poor

      SHGs and its

    • federations, cooperatives, (community
    • ownership and governance)
    • Enabling stream
    • Promotional Institution NGOs, philanthropic
    • institutions and donors
    • Regulatory Institutions RBI, State and Central
    • Governments
    Contd
    • Supply Stream
    • Savings and Credit
    • Commercial, rural and private banks
    • Cooperative banks
    • Specialised development financial institutions
    • (Housing banks, SIDBI)
    • Regulated NBFCs as exclusive MFIs non-
    • regulated MFIs
    • Insurance companies
    • Post office

    Sustainable Microfinance forPoverty Reduction

    PART - II

    DHAN Foundation

    Context and Characterisation for Poverty

    Reduction (local economy)
    • Opportunities
    • Low High
    • Risks / Vulnerabilities
    • Low Rural Agricultural Urban Slums
    • Artisan (service trading)
    • (Production activities)
    • High Coastal, Desert areas Tribal areas
    • (seasonality-hunting) (primary sector)
    • Natural resources
    • Low infrastructure
    Characterisation of household poverty
    • 1 Based on economic phase
    • Survival Wage Debt
    • earning and no asset
    • Subsistence Partly Fragile
    • self-employed Asset
    • Self employment Earning from Performing
    • own activity Assets worth
    • Rs 5000 to 20000
    • Entrepreneurship Own activity Assets
    • and employing beyond Rs 50,000
    • others
    16
    • 2. Based on Family stage
    • Nuclear 2-5 years Surplus
    • (Just married)
    • School going 5-10 years Deficit
    • Earning children 5-10 years High
    surplus
  • Marriage of 5 years High
  • Children deficit debt
  • Aged couple 10-15 years Dependence
  • deficit
  • Building social capital and entitlements
    Poverty Reduction Strategies
    • Preventive - Skill and capacity building
    • Promotive - Opportunities enhancement
    • Curative - Addressing exploitation
    • access control of resources
    credit
  • Eradicative - Drivers of economy with

    performing assets

  • Conservation Approach of Micro Finance
    • Arresting leakages
    • 1.1 From usurious interest rates
    • 1.2 From alcohol addiction
    • 1.3 Social expenditure on functions
    • 1.4 Medical expenses because of poor health
    Conservation Approach (Contd)
    • Strengthening existing activities
    • 2.1 Local market
    • 2.2 Manageable by members
    • 2.3 Gap exists for growth skill available
    Conservation Approach (Contd)
    • Features
    • 3.1 Variables with internal control
    • 3.2 Sustainable to retain incremental income
    • 3.3 Value orientation

    Risk

    Low

    High

    Low

    Conservation of Cold money to Hot money with

    leveraging of development finance

    Hot Money Stake (equity) building of people

    through savings and contributions (about 25

    percent of development capital) in their

    self-management system with cost coverage

    Building social infrastructure for practicing

    grassroots democracy

    Local Management for development and change

    Nested People Institutions

    Transforming SHGs to Civil Society
    • Ensuring entitlements
    • Redefining entitlements
    • Setting agenda for mainstream institutions

    Evolving development policies for poverty

    reduction

    Evolving development policies for poverty

    reduction (Contd)

    Establishing Early Warning System
    • EWS for Female infanticide
    • EWS for Alcohol addiction
    • EWS for Migration
    • EWS for School dropouts
    • EWS for Widow phenomena
    Keys of Sustainable Micro finance
    • Graduation of lending Credit discipline
    • Working Capital
    • Enhancing existing assets Quality and base
    • New activities with strong market linkages
    • Cost Coverage no subsidy
    • High Quality of SHGs
    • Credit linkage
    • Branch Based
    • Bridge Support
    • Conservation Approach of Micro finance
    Keys of Sustainable Micro finance
    • Value Building to reach no loan or less loan
    • Business Development Services
    • Integration of Micro finance with Local economy
    • Driver of growth
    • Transforming SHGs to Civil Society
    • Linkage engine for health education and
    development issues
  • Integrating with Social Security Products
  • Integration of Micro finance with different

    development themes
    • Themes
    • Water Users Group
    • Joint Forest Management
    • Health Groups
    • Education Groups
    • Agriculture Development Groups
    • Features
    • Savings led
    • Streamlining systems
    • Bank linkage for credit
    • Theme (focus) lending
    • Balancing grants and loans
    Limitations of Micro Finance
    • Mass Skill base limited, mostly agriculture
    based
  • Inadequate market linkages External for forward and backward linkages
  • Capacity of local economy
  • Capacity of human resources for product development
  • Credit alone Credit plus, plus
  • Source: www.powershow.com

    Category: Payday loans

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