BANKER TO THE POOR

(MICRO FINANCING)

5/1/2012

Presentated By- Presentated ToSarita Patidar Sandeep Gole Section SB2 Prof. Rahul Bhatia IIPM, New Delhi

WHAT IS MICRO FINANCE

Micro Finance is the supply of loans, savings, and other basic financial service to the poor .

To most, micro finance means providing very poor families with very small loans (micro credit) to help them engage in productive activities or grow their tiny businesses. -> Financial Gateway

MICRO FINANCE AND MICRO CREDIT

Micro finance refers to loans, savings, insurance, transfer services and other financial products targeted at low-income clients. Micro credit refers to a small loan to a client made by a bank or other institution. Micro credit can be offered, often without collateral, to an individual or through group lending.

FOUNDER
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Professor Muhammad Yunus the founder and Managing Director of Grameen Bank in Bangladesh in 1983. He was Born in 1940 in the seaport city of Chittagong. He studied at Dhaka University in Bangladesh. He received his Ph.D. in economics from Vanderbilt in 1969 . He also got many international awards for his ideas and endeavors. Objective was to help poor people. He is Nobel Price winner.

GRAMEEN BANK
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Around 2468 Branches. 24000 staff in Grameen Bank.

7.34million Borrower.
82,0257 villages covered. 52 countries.
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CONCEPT OF MICRO FINANCING

Micro finance can be defined as providing credit, thrift and finance related services and products of very small amount so as to improve the living standards of poor and the downtrodden.

Develop habits and financial vision among the rural poor, The focus induced development from the above to initiated development from below.
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MICRO FINANCE IN INDIA

Micro finance has been in practice for ages (though informally). Legal framework for establishing the co-operative movement set up in 1904. Reserve Bank of India Act, 1934 provided for the establishment of the Agricultural Credit Department. Nationalization of banks in 1969 Regional Rural Banks created in 1975.

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. Cumulative disbursements under all micro finance programmes is only about Rs. 12,000 crores. Only about 10 % of rural poor have access to micro finance
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THE STATUS OF MICRO FINANCE IN INDIA

Considerable gap between demand and supply for all financial services Majority of poor are excluded from financial services. This is due to the following reasons Bankers feel that it is fraught with risks and uncertainties. High transaction costs Unfavourable policies like caps on interest rates which effectively limits the viability of serving the poor.

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CONT

About 56 % of the poor still borrow from informal sources. 70 % of the rural poor do not have a deposit account 87 % have no access to credit from formal sources. Less than 15 % of the households have any kind of insurance. Negligible numbers have access to health insurance

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MICRO-FINANCE SERVICE IS PROVIDED BY(a) Formal institutions Regional Rural Bank, cooperatives. (b) Semi-formal institutions Non-Government organisations. (c) Informal Sources Money Lenders and Shopkeepers.

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FEATURES OF INDIAN MF

About 60 % of the MFIs are registered as societies. About 20 % are Trusts About 65 % of the MFIs follow the operating model of self help group (SHGs). 600 MFI initiatives have a cumulative outreach of 1.25 crore poor households NABARDs bank linkage program has cumulatively reached a total of 9.4 lakh SHGs with about 1.4 crore households.

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CLIENTS OF MICRO FINANCE

low-income people self-employed, often household-based entrepreneurs In rural areas, they are usually small farmers and others who are engaged in small incomegenerating activities such as food processing and petty trade. In urban areas, it include shopkeepers, service providers, artisans, street vendors, etc. Poor and vulnerable non-poor who has a relatively unstable source of income.

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SOME FACTS

All over the world, there are nearly 100 crore poor people who have no access to formal financial services. Of these, nearly 20 per cent live in India. In the Indian context, at present loans up to Rs. 25,000 are covered under Micro-Finance.

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As per the 10th Plan document , 26% of population lives below the poverty line. Of this 19.3 is in the rural area and the remaining 6.7 in urban areas.
There is primarily a huge demand for the microfinance support in this sector. This is met by commercial banks, co-operative banks as well as Regional Rural Banks. 350 million very poor families now touch the lives of more than one 14 and half a billion family members around the world. That is half of the worlds poorest people.

MICROFINANCE & WOMENS CONTRIBUTION

Micro finance institutions are extremely supportive towards womens funding needs, bringing about a perceptible change in their status.

the number of migrant male workers on the rise, many women in the lower classes are assuming the role of heads of households. Bringing women centre stage from where they would be playing an extremely important part in economic activity.

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Womens contribution to GDP has been possible in countries and states where multiple jobs and activities are taken into account 15

THE IMPACT OF MICROFINANCE: HOUSEHOLD LEVEL

leads to an increase in household income

Loans

and deposit services can result in diversification of income sources or enterprise growth

Access

to financial services enables clients to build and change their mix of assets
to microfinance enables poor people to manage risk better and take advantage of 16 opportunities

Access

THE IMPACT OF MICROFINANCE : INDIVIDUAL LEVEL

For women, greater control over

resources leads to growth in selfesteem, self-confidence, and opportunities

higher levels of savings than nonclients, important for building assets

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THE IMPACT OF MICROFINANCE ENTERPRISE LEVEL

Enterprise revenues rise as a

result of microfinance services, but not always where expected

enterprises appears negligible, but client households often create work for others

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MILLENNIUM DEVELOPMENT GOALS

More than one billion people struggle to survive on less than one dollar a day. Another 2.7 billion live on less than two dollars a day In 2005, 147 nations (UN) agreed that, together, the citizens of the world must work to put an end to severe poverty by 2015. They drafted eight important goals which, when achieved, will improve the lives of the three billion people living in dire poverty

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THE EIGHT GOALS

Eliminate Extreme Poverty and Hunger Achieve Universal Primary Education Promote Gender Equality and Empower Women Reduce Child Mortality Improve Maternal Health Combat HIV/AIDS, Malaria and Other Diseases Ensure Environmental Sustainability and Develop a Global Partnership for Development

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Financial Inclusion : The Indian Perspective

Payments + Remittances

Financial Inclusion

Insurance

Financial Advice

Affordable Credit

Lack of Assets (for Collateral)21

SWOT ANALYSIS
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STRENGTH
Helped in reducing the poverty.

Improve standard of living.

WEAKNESS
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Not properly regulated.

High number of people access to informal sources of finance. Concentrating on few people only and mainly in urban areas.

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OPPORTUNITY
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Huge demand and supply gap. Employment Opportunity. Huge Untapped Market Opportunity for Pvt. Banks, Foreign Banks to enter this business segment.

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SKS MICROFINANCE: ANDHRA PRADESH ISSUES

No.1 Microfinance institute in India based in AP. SKS Microfinance has 31 bank partners. MFIs lending model is not exactly poor friendly. MFIsareonlyfornot-for-profitentities. Charged high rate of interest to farmers. Threaten them for collection. People committed suicide.

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IF You are Uplifting The Poor Your Uplifting The Nation

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