Professional Documents
Culture Documents
its
Opportunities and Limitations
Nishant Bali
IBS Ahemedabad
Ø Scenario of Micro Finance in India.
Ø Micro-Credits model.
Ø Only 20% access loan from the formal sources and 80% from the
informal sources.
Ø Customers of Micro Finance are “Small and marginal farmers", " rural
artisans" and "economically weaker sections“
Micro-Credits model
Ø Focus on, providing the capital for poor women to use their innate
"survival skills" to pull themselves out of poverty.
Ø In case any member defaults the entire circle is denied access to credit
Business model of GRAMEEN bank
Ø Introduction
• The Grameen Bank started in 1976 by the Nobel Laureate, Professor
Muhammad Yunus in Bangladesh .
• Grameen today has some 2,468 branches in Bangladesh, with a staff of
24,703 people serving 7.34 million borrowers from 80,257 villages.
• Grameen‘s methods are applied in 58 countries — including the United
States.
• Grameen Bank borrowers own 94% of the Bank. The remaining 6% are
owned by the government. (January 09)
Board of Director
Chairman
Managing Director
Executive Director(4)
Ø NABARD see the credit rating of that institute given by the rating
agency.
Ø NABARD analyze the balance sheet and profit and loss statement of the
borrowing institutes.
Board of Trustees
CEO
Brach Mgr
FCO’s
Ø There are three kinds of costs the MFI has to cover when it makes
microloans:
• The cost of the money that it lends.
• The cost of loan defaults.
• Transaction and Operating cost.
Conti…….
Ø For instance, MFI lends is 10 percent, and it experiences defaults of 1
percent of the amount lent, then total Rs 11 for a loan of Rs 100, and Rs
55 for a loan of Rs 500. And the third cost i.e. transaction cost.
:Example
Ø Suppose that the transaction cost is Rs 15 per loan and that the loans
are for one year. To break even on the Rs 500 loan, the MFI would
need to collect interest of Rs 50 + Rs 5 + Rs 15 = Rs 70, which
represents an annual interest rate of 13 percent. To break even on the
Rs 100 loan, the MFI would need to collect interest of Rs 10 +Rs 1 + Rs
15 = Rs 26, which is an interest rate of 26 percent.
Rate Ceilings: Not the Answer
Ø There is hue and cry on the high rate of interest which is beigncharged
by many MFI’s.
Ø What are the reasons why rate ceiling can create disaster?
• Rate ceiling will diminishing the return of MFI’s.
• If rates are set to a level less than that required to cover costs, it will lead to
losses and also reduce their creditworthiness and ability to borrow.
• Compelled rate ceiling would increase more poverty in the economy.
SWOT Analysis of micro finance
Ø Strength
• Helped in reducing the poverty.
• Huge networking available.
Ø Weakness
• Not properly regulated.
• High number of people access to informal sources of finance.
• Concentrating on few people only and mainly in urban areas.
Ø Opportunity
• Huge demand and supply gap.
• Employment Opportunity.
• Huge Untapped Market.
• Opportunity for Pvt. Banks, NBFCs, Foreign Banks to enter this business
segment.
Interview of End Users
Ø Are you a regular or new customer?
Ø Estimated that in next five years, 65% of the poor people will have excess to
MFIs.
Ø Many Pvt. Banks and Foreign Banks would enter this business segment,
because of very low NPAs.
Ø Estimated that 5 % of the number of people below the poverty line will get
reduced in the next 5 years.(World Bank report)
Learning from the project
Ø I learnt in detail the process of Micro Finance, from its need at the grass
root level.
Ø Most important learning, how it can change the life of the Economic
disadvantaged people.
Conclusion
• “Don’t wait, the time will never be just right. Start where you stand and
work with whatever tools you may have at your commands and the
better tolls will be found as you go along”.
William Surds
Learning from THE Company
Ø Practical learning of Equity, Future & Options market by terminal
trading.
Ø Apart from Micro Finance, Nine mine projects, which helped to relate
to the Present Market conditions.