MFIs _ Financial Inclusion

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					MFIs & Financial Inclusion



                    Group: 6
Summary
Micro Finance Institutions
         Financial Inclusion
“the process of ensuring access to financial services and timely and
   adequate credit where needed by vulnerable groups such as
   weaker sections and low income groups at an affordable cost”

These services are:

   (i) a no-frills banking account for making and receiving
   payments,

   (ii) a savings product suited to the pattern of cash flows of a poor
   household,

   (iii) money transfer facilities,

   (iv) small loans and overdrafts for productive, personal and other
   purposes,

   (v) micro-insurance (life and non-life)
C Rangarajan Committee on Financial Inclusion


• There is a need to recognize a separate category of
  Microfinance – Non Banking Finance Companies (MF–NBFCs)

• Opening of specialised microfinance branches / cells in
  potential urban centers for exclusively catering to microfinance
  and SHG - bank linkages requirements of the urban poor.

• An enabling provision be made in the NABARD Act, 1981
  permitting NABARD to provide micro finance services to the
  urban poor .
Functioning of Micro Financial
         Institutions
   Regulatory framework of Micro Financial
                 Institutions



• Current estimates of the number of NGOs
  engaged in providing microfinance services to
  the poor exceed 1,000 organisations

• More than 1000 MFIs are there in India
  today, among which 400-500 continue to
  operate in the form of registered societies or
  trusts,300-400 MFIs operate as cooperatives
     Role of MFI’s in MSME’s

• MFI’s offer micro credit to
  borrowers

• MFI’s lend to MSME’s

• 7% contribution by MFI’s
    CURRENT SCENARIO

• 3 Million MSME( 50% of Industrial
  Output & 42% of Total Exports)

• 1000 MFI

• Micro lenders increased to 60% in
  2008-2009


• SMERA MFI Rating
Problems faced by MFIs
• Lack of funds
• Financial exclusion
• Unable to meet the needs of
  clients
• Interest rates
• Service taxes
• Not able to access tax refunds
• Lack of trained labor and
  mobilization of resources
           Suggestions
Building sustainable MFIs in India:
• NBFC status – Allows MFIs to be regulated by RBI
• Bigger is better
• Flexibility
• Tax concessions
• Use of MIS
• Permitting MFIs to take deposits from members/borrowers
• Simplify foreign investment regulations to enable MFIs to
   raise foreign equity

Emerging trends in MFIs in relation to HRM:
• Separation of HRM as a key function
• Recruiting professionals
• Focus on induction and orientation
• Training and grooming field staff
• Incentive-based salaries
     Suggestions Contd…
Financial sustainability can be
  achieved through:

• Controlling Costs
  - Reducing Average Cost of Funds
  - Reducing Cost of Operations
  - Reducing Cost of Bad Debts
• Increasing Volumes
• Increasing Services – Savings and
  Insurance
Thank You

				
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posted:2/11/2010
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