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CHAPTER 1
INTRODUCTION
Microfinance is defined as any activity that includes the provision of financial services such
as credit, savings, and insurance to low income individuals which fall just above the
nationally defined poverty line, and poor individuals which fall below that poverty line, with
the goal of creating social value. The creation of social value includes poverty alleviation and
the broader impact of improving livelihood opportunities through the provision of capital for
micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of sectors provide microfinance in India, using a range of microfinance
delivery methods. Since the ICICI Bank in India, various actors have endeavored to provide
access to financial services to the poor in creative ways. Governments also have piloted
national programs, NGOs have undertaken the activity of raising donor funds for on-lending,
and some banks have partnered with public organizations or made small inroads themselves
in providing such services. This has resulted in a rather broad definition of microfinance as
any activity that targets poor and low-income individuals for the provision of financial
services. The range of activities undertaken in microfinance include group lending, individual
lending, the provision of savings and insurance, capacity building, and agricultural business
development services. Whatever the form of activity however, the overarching goal that
unifies all actors in the provision of microfinance is the creation of social value.
Microfinance Definition
According to International Labor Organization (ILO), Microfinance is an economic
development approach that involves providing financial services through institutions to low
income clients.
In India, Microfinance has been defined by The National Microfinance Taskforce, 1999 as
provision of thrift, credit and other financial services and products of very small amounts to
the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and
improve living standards.
"The poor stay poor, not because they are lazy but because they have no access to capital."
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The dictionary meaning of finance is management of money. The management of money
denotes acquiring & using money. Micro Finance is buzzing word, used when financing for
micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to
empower under-privileged class of society, women, and poor, downtrodden by natural
reasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are
founded on the philosophy of cooperation and its central values of equality, equity and
mutual self-help. At the heart of these principles are the concept of human development and
the brotherhood of man expressed through people working together to achieve a better life for
themselves and their children.
Traditionally micro finance was focused on providing a very standardized credit product. The
poor, just like anyone else, (in fact need like thirst) need a diverse range of financial
instruments to be able to build assets, stabilize consumption and protect themselves against
risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to
find efficient and reliable ways of providing a richer menu of micro finance products. Micro
Finance is not merely extending credit, but extending credit to those who require most for
their and familys survival. It cannot be measured in term of quantity, but due weightage to
quality measurement. How credit availed is used to survive and grow with limited means.
Concept and Features of Micro-finance:
1. It is a tool for empowerment of the poorest.
2. Delivery is normally through Self Help Groups (SHGs).
3. It is essentially for promoting self-employment, generally used for:
(a) Direct income generation
(b) Rearrangement of assets and liabilities for the household to participate in
future opportunities and
(c) Consumption smoothing.
4. It is not just a financing system, but a tool for social change, specially for women.
5. Because micro credit is aimed at the poorest, micro-finance lending technology needs
to mimic the informal lenders rather than the formal sector lending. It has to:
(a) Provide for seasonality
(b) Allow repayment flexibility
(c) Fix a ceiling on loan sizes.
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Microfinance approach is based on certain proven truths which are not always recognized.
These are:
1. That the poor are bankable; successful initiatives in micro finance demonstrate that
there need not be a tradeoff between reaching the poor and profitability - micro
finance constitutes a statement that the borrowers are not weaker sections in need of
charity, but can be treated as responsible people on business terms for mutual profit .
2. That almost all poor households need to save, have the inherent capacity to save small
amounts regularly and are willing to save provided they are motivated and facilitated
to do so.
3. That easy access to credit is more important than cheap subsidized credit which
involves lengthy bureaucratic procedures - (some institutions in India are already
lending to groups or SHGs at higher rates - this may prevent the groups from enjoying
a sufficient margin and rapidly accumulating their own funds, but members continue
to borrow at these high rates, even those who can borrow individually from banks).
4. 'Peer pressure' in groups helps in improving recoveries.



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INDUSTRY PROFILE
The Origin of Microfinance
Although neither of the terms microcredit or microfinance were used in the academic
literature nor by development aid practitioners before the 1980s or 1990s, respectively, the
concept of providing financial services to low income people is much older.
While the emergence of informal financial institutions in Nigeria dates back to the 15th
century, they were first established in Europe during the 18th century as a response to the
enormous increase in poverty since the end of the extended European wars (1618 1648). In
1720 the first loan fund targeting poor people was founded in Ireland by the author Jonathan
Swift. After a special law was passed in 1823, which allowed charity institutions to become
formal financial intermediaries a loan fund board was established in 1836 and a big boom
was initiated. Their outreach peaked just before the government introduced a cap on interest
rates in 1843. At this time, they provided financial services to almost 20% of Irish
households. The credit cooperatives created in Germany in 1847 by Friedrich Wilhelm
Raiffeisen served 1.4 million people by 1910. He stated that the main objectives of these
cooperatives should be to control the use made of money for economic improvements, and
to improve the moral and physical values of people and also, their will to act by themselves.
In the 1880s the British controlled government of Madras in South India, tried to use the
German experience to address poverty which resulted in more than nine million poor Indians
belonging to credit cooperatives by 1946. During this same time the Dutch colonial
administrators constructed a cooperative rural banking system in Indonesia based on the
Raiffeisen model which eventually became Bank Rakyat Indonesia (BRI), now known as the
largest MFI in the world.

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EVOLUTION OF MICROFINANCE IN INDIA (1960 TO TODAY)
Microfinance in India emerged as an effort to reach out to the un-banked, lower income
segments of the population
1960 to 1980 1990 2000
Phase 1: Social Banking Phase 2: Financial Systems
Approach
Phase 3: Financial Inclusion
1.Nationalization of private
commercial banks
1.Peer-pressure 1.NGO-MFIs and SHGs
gaining more legitimacy
2.Expansion of rural branch
network
2.Establishment of
MFIs,typically of non-profit
origins
2.MFIs emerging as strategic
partners to diverse entities
interested in thelow-income
segments
3.Extension of subsidized
credit
3.Consumer finance emerged
ashighgrowth area

4.Establishment of Rural
Regional Banks
4.Increased policy regulation
5.Establishment of apex
institutionssuch as National
Bank for Agricultureand
Rural Development and
SmallIndu- stries
Development Bank of India
5.Increasing
commercialization
Table 3.1
Phase 1: In the 1960s, the credit delivery system in rural India was largely dominated by the
cooperative segment. The period between 1960 and 1990, referred to as the social banking
phase. This phase includes nationalization of private commercial banks, expansion of rural
branch networks, extension of subsidized credit, establishment of Regional Rural Banks
(RRBs) and the establishment of apex institutions such as the National Bank for Agriculture
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and Rural Development (NABARD) and the Small scale Industries Development Board of
India (SIDBI).
Phase 2: After 1990, India witnessed the second phase financial system approach of credit
delivery. In this phase NABARD initiated the Self Help Group (SHG) - Bank Linkage Bank
Linkage program, which links informal women's groups to formal banks. This concept held
great appeal for non-government organizations (NGOs) working with the poor, prompting
many of them to collaborate with NABARD in the program. This period also witnessed the
entry of Microfinance Institutions (MFIs), largely of non-profit origins, with existing
development programs.
Phase 3: In 2000, the third phase in the development of Indian microfinance began, marked
by further changes in policies, operating formats, and stakeholder orientations in the financial
services space. This phase emphasizes on inclusive growth and financial inclusion. This
period also saw many NGO-MFIs transform into regulated legal formats such as Non-
Banking Finance Companies (NBFCs). Commercial banks adopted innovative ways of
partnering with NGO-MFIs and other rural organizations to extend their reach into rural
markets. MFIs have emerged as strategic partners to individuals and entities interested in
reaching out to India's low income client segments.
Policy Attention to Microfinance After 2000
1999 --- Official definition of microfinance by RBI
August 2000 --- 'Micro Credit/Rural Credit' included in the list of permitted non-banking
financial company (NBFC) activities considered for Foreign Direct Investment (FDI)
2005 --- MFIs acknowledged for the first time in the Budget Speech by the Finance Minister
Government intends to promote MFIs in a big way. The way forward, I believe, is to
identify MFIs, classify and rate such institutions, and empower them to intermediate between
the lending banks and the beneficiaries.
January 2006 --- Announcement of the business correspondent model
February 2006 --- Budget Speech by the Finance Minister promises a formal statutory
framework for the promotion, development and regulation of the microfinance sector
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March 2006 --- Comprehensive guidelines by RBI on loan securitization
July 2006 --- RBI master circular allows NGOs involved in microfinance to access External
Commercial Borrowings (ECB) up to USD 5 million (INR 20.25 crores) during a year.
March 2007 --- Finance Minister introduces the Micro Finance Sector Development and
Regulation Bill 2007 in LokSabha
Entities in Micro Finance:-
Indian Microfinance dominated by two operational approaches:
SHG
Initiated by NABARD through SHG Bank Linkage Program.
Largest outreach to microfinance clients in the world.
MFIs
Emerged in the late 1990s to harness social and commercial funds.
Today the number of Indian MFIs has increased and crossed 1000.
SHGs and MFIs disbursement till 2007- USD 3.7 billions
SHGs comprise twenty or fewer members, of whom the majority are women from the poorest
castes and tribes. Members save small amounts of money, as little as a few rupees a month in
a group fund. Members may borrow from the group fund for a variety of purposes ranging
from household emergencies to school fees. Banks typically lend up to four rupees for every
rupee in the group fund. Groups pay a reasonable 12-24% annual rate of interest. Nearly 1.4
million SHGs comprising approximately 20 million women now borrow from banks, which
makes the Indian SHG-Bank Linkage model the largest microfinance program in the world.
MFI is an organization that offers financial services to low income populations. Almost all of
these offer microcredit and only take back small amounts of savings from their own
borrowers, not from the general public. Term refers to a wide range of organizations - NGOs,
credit unions, cooperatives, private commercial banks and non-bank financial institutions.

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Microfinance Today
In the 1970s a paradigm shift started to take place. The failure of subsidized government or
donor driven institutions to meet the demand for financial services in developing countries let
to several new approaches. Some of the most prominent ones are presented below.Bank
Dagan Bali (BDB) was established in September 1970 to serve low income people in
Indonesia without any subsidies and is now well-known as the earliest bank to institute
commercial microfinance. While this is not true with regard to the achievements made in
Europe during the 19th century, it still can be seen as a turning point with an ever increasing
impact on the view of politicians and development aid practitioners throughout the world. In
1973 ACCION International, a United States of America (USA) based non-governmental
organization (NGO) disbursed its first loan in Brazil and in 1974 Professor Muhammad
Yunus started what later became known as the Grameen Bank by lending a total of $27 to 42
people in Bangladesh. One year later the Self-Employed Womens Association started to
provide loans of about $1.5 to poor women in India. Although the latter examples still were
subsidized projects, they used a more business oriented approach and showed the world that
poor people can be good credit risks with repayment rates exceeding 95%, even if the interest
rate charged is higher than that of traditional banks. Another milestone was the
transformation of BRI starting in 1984. Once a loss making institution channeling
government subsidized credits to inhabitants of rural Indonesia it is now the largest MFI in
the world, being profitable even during the Asian financial crisis of 1997 1998.In February
1997 more than 2,900 policymakers, microfinance practitioners and representatives of
various educational institutions and donor agencies from 137 different countries gathered in
Washington D.C. for the first Micro Credit Summit. This was the start of a nine yearlong
campaign to reach 100 million of the world poorest households with credit for self-
employment by 2005. According to the Microcredit Summit Campaign Report 67,606,080
clients have been reached through 2527 MFIs by the end of 2002, with 41,594,778 of them
being amongst the poorest before they took their first loan. Since the campaign started the
average annual growth rate in reaching clients has been almost 40 percent. If it has continued
at that speed more than 100 million people will have access to microcredit by now and by the
end of 2005 the goal of the microcredit summit campaign would be reached. As the president
of the World Bank James Wolfensohn has pointed out, providing financial services to 100
million of the poorest households means helping as many as 500 600 million poor people.
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Micro Finance Models
1. Micro Finance Institutions (MFIs):
MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and
cooperatives. They are provided financial support from external donors and apex
institutions including the RashtriyaMahilaKosh (RMK), SIDBI Foundation for micro-
credit and NABARD and employ a variety of ways for credit delivery.
Since 2000, commercial banks including Regional Rural Banks have been providing
funds to MFIs for on lending to poor clients. Though initially, only a handful of
NGOs were into financial intermediation using a variety of delivery methods, their
numbers have increased considerably today. While there is no published data on
private MFIs operating in the country, the number of MFIs is estimated to be around
800.
Legal Forms of MFIs in India
Types of MFIs Estimated
Number*
Legal Acts under which Registered
1. Not for Profit MFIs
a.) NGO - MFIs
400 to 500 Societies Registration Act, 1860 or
similar Provincial Acts
Indian Trust Act, 1882
b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956
2. Mutual Benefit MFIs
a.) Mutually Aided Cooperative
Societies (MACS) and similarly
set up institutions
200 to 250 Mutually Aided Cooperative Societies
Act enacted by State Government
3. For Profit MFIs
a.) Non-Banking Financial
Companies (NBFCs)
6 Indian Companies Act, 1956
Reserve Bank of India Act, 1934
Total 700 800
Table 3.3

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2. Bank Partnership Model
This model is an innovative way of financing MFIs. The bank is the lender and the MFI
acts as an agent for handling items of work relating to credit monitoring, supervision
and recovery. In other words, the MFI acts as an agent and takes care of all
relationships with the client, from first contact to final repayment. The model has the
potential to significantly increase the amount of funding that MFIs can leverage on a
relatively small equity base.
A sub - variation of this model is where the MFI, as an NBFC, holds the individual
loans on its books for a while before securitizing them and selling them to the bank.
Such refinancing through securitization enables the MFI enlarged funding access. If the
MFI fulfills the true sale criteria, the exposure of the bank is treated as being to the
individual borrower and the prudential exposure norms do not then inhibit such funding
of MFIs by commercial banks through the securitization structure.
3. Banking Correspondents
The proposal of banking correspondents could take this model a step further
extending it to savings. It would allow MFIs to collect savings deposits from the poor
on behalf of the bank. It would use the ability of the MFI to get close to poor clients
while relying on the financial strength of the bank to safeguard the deposits. This
regulation evolved at a time when there were genuine fears that fly-by-night agents
purporting to act on behalf of banks in which the people have confidence could
mobilize savings of gullible public and then vanish with them. It remains to be seen
whether the mechanics of such relationships can be worked out in a way that minimizes
the risk of misuse.
4. Service Company Model
Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works
hand in hand with that MFI to extend loans and other services. On paper, the model is
similar to the partnership model: the MFI originates the loans and the bank books them.
But in fact, this model has two very different and interesting operational features:
The MFI uses the branch network of the bank as its outlets to reach clients. This
allows the client to be reached at lower cost than in the case of a standalone MFI.
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In case of banks which have large branch networks, it also allows rapid scale up. In
the partnership model, MFIs may contract with many banks in an arms length
relationship. In the service company model, the MFI works specifically for the bank
and develops an intensive operational cooperation between them to their mutual
advantage.
The Partnership model uses both the financial and infrastructure strength of the
bank to create lower cost and faster growth. The Service Company Model has the
potential to take the burden of overseeing microfinance operations off the
management of the bank and put it in the hands of MFI managers who are focused
on microfinance to introduce additional products, such as individual loans for SHG
graduates, remittances and so on without disrupting bank operations and provide a
more advantageous cost structure for microfinance.
Bank Led Model
The bank led model was derived from the SHG-Bank linkage program of NABARD.
Through this program, banks financed Self Help Groups (SHGs) which had been promoted
by NGOs and government agencies.
ICICI Bank drew up aggressive plans to penetrate rural areas through its SHG program.
However, rather than spending time in developing rural infrastructure of its own, in 2000,
ICICI Bank announced merger of Bank of Madura (BoM), which had significant presence in
the rural areas of South India, especially Tamil Nadu, with a customer base of 1.9 million and
87 branches. Bank of Madura's SHG development program was initiated in 1995. Through
this program, it had formed, trained and initiated small groups of women to undertake
financial activities like banking, saving and lending. By 2000, it had created around 1200
SHGs across Tamil Nadu and provided credit to them.


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MICROFINANCE INSTITUTIONS

Microfinance institutions are perhaps one of the most important vehicles to reach the rural
poor. These institutions can act as very important tool to provide the rural entrepreneurs with
micro-loans, which will help them to start their own businesses and sustain them. One
advantage that these institutions have over other financial services delivery vehicles is the
focus. While NGOs have to straddle with various non-financial and financial services
activities and commercial bank with other operations. MFIs can solely focus on providing the
financial service to the poor since the very objective of starting this kind of institution is to
provide financial services in the rural areas. There are many examples of MFIs that has done
some stellar work in this area such as ACCION International, BancoSol and Grameen Bank.
These institutions have helped many people in enhancing their lives and achieving a decent
social status in the societies that they are living in. The key advantages that they have over
the other forms of microfinance are:
Focus is solely on providing financial services.
It can provide whole gamut of services from loans to insurance.
However, it has also some advantages like sustainability of these institutions. Most of the
MFIs including Grameen bank are still donor supported organization and many of them still
depend on outside funds for their survival. Only some have like BancoSol have made
successful transition from donor supported financially self-sustained organization.
Apart from these there are several other important mechanisms through while microfinance is
provided like mutual community groups, regional woman group like Development of Women
and Child in Rural Area (DWCRA) and other local organizations. However, they have not
played a significant role in the microfinance movement till now and they can play a major
role in providing rural financial services in the long run.



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CHAPTER 2
LITRATURE REVIEW
Mohammed AnisurRahaman (2007)
Has examined that about microfinance and to investigate the impact of microfinance on the
poor people of the society with the main focus on Bangladesh. We mainly concise our thesis
through clients (the poor people, who borrowed loan from microfinance institutions)
perspective and build up our research based on it. Therefore, the objective of this study is to
show how microfinance works, by using group lending methodology for reducing poverty
and how it affects the living standard (income, saving etc.) of the poor people in Bangladesh.
Microfinance has the positive impact on the standard of living of the poor people and on their
life style. It has not only helped the poor people to come over the poverty line, but has also
helped them to empower themselves.
SusyCheston (2002)
Has examined that Microfinance has the potential to have a powerful impact on womens
empowerment. Although microfinance is not always empowering for all women, most
women do experience some degree of empowerment as a result. Empowerment is a complex
process of change that is experienced by all individuals somewhat differently. Women need,
want, and profit from credit and other financial services. Strengthening womens financial
base and economic contribution to their families and communities plays a role in empowering
them. Product design and program planning should take womens needs and assets into
account. By building an awareness of the potential impacts of their programs, MFIs can
design products, services, and service delivery mechanisms that mitigate negative impacts
and enhance positive ones.
Linda Mayoux (Feb 2006)
Has examined that Micro-finance programmes not only give women and men access to
savings and credit, but reach millions of people worldwide bringing them together regularly
in organized groups. Through their contribution to womens ability to earn an income, micro-
finance programmes can potentially initiate a series of virtuous spirals of economic
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empowerment, increased well-being for women and their families and wider social and
political empowerment Banks generally use individual rather than group-based lending and
may not have scope for introducing non-financial services. This means that they cannot be
expected to have the type of the focused empowerment strategies which NGOs have
EoinWrenn (2005)
Has examined that microfinance creates access to productive capital for the poor, which
together with human capital, addressed through education and training, and social capital,
achieved through local organization building, enables people to move out of poverty (1999).
By providing material capital to a poor person, their sense of dignity is strengthened and this
can help to empower the person to participate in the economy and society. The impact of
microfinance on poverty alleviation is a keenly debated issue as we have seen and it is
generally accepted that it is not a silver bullet, it has not lived up in general to its expectation
(Hulmeand Mosley, 1996). However, when implemented and managed carefully, and when
services are designed to meet the needs of clients, microfinance has had positive impacts, not
just on clients, but on their families and on the wider community.
Cheston& Kuhn (2004)
Has examined that in their study concluded that micro-finance programmes have been very
successful in reaching women. This gives micro-finance institutions an extraordinary
opportunity to act intentionally to empower poor women and to minimize the potentially
negative impacts some women experiences. We also found increased respect from and better
relationships with extended family and in-laws. While there have been some reports of
increased domestic violence, Hashemi and Schuler found a reduced incidence of violence
among women who were members of credit organizations than among the general
population.
Dr. JyotishPrakashBasu (2006)
Has examined that the two basic research questions. First, the paper tries to attempt to study
how a womans tendency to invest in safer investment projects can be linked to her desire to
raise her bargaining position in the households. Second, in addition to the project choice,
women empowerment is examined with respect to control of savings, control of income,
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control over loans, control over purchasing capacity and family planning in some sample
household in Hooghly district of West Bengal. The empowerment depends on the choice of
investment of project. The choice of safe project leads to more empower of women than the
choice of uncertain projects. The Commercial Banks and Regional Rural banks played a
crucial role in the formation of groups in the SHGs -Bank Linkage Program in Andhra
Pradesh whiles the Cooperative Banks in West Bengal.
Chintamani Prasad Patnaik (March 2012)
Has examined that microfinance seems to have generated a view that microfinance
development could provide an answer to the problems of rural financial market development.
While the development of microfinance is undoubtedly critical in improving access to finance
for the unserved and underserved poor and low-income households and their enterprises, it is
inadequate to address issues of rural financial market development. It is envisaged that self-
help groups will play a vital role in such strategy. But there is a need for structural orientation
of the groups to suit the requirements of new business. Microcredit movement has to be
viewed from a long-term perspective under SHG framework, which underlines the need for a
deliberate policy implication in favour of assurance in terms of technology back-up, product
market and human resource development.
Hunt, J &Kasynathan (2002)
Has examined that poor women and men in the developing world need access to
microfinance and donors should continue to facilitate this. Research suggests that equity and
efficiency arguments for targeting credit to women remain powerful: the whole family is
more likely to benefit from credit targeted to women, where they control income, than when
it is targeted to men. Microfinance must also be re-assessed in the light of evidence that the
poorest families and the poorest women are not able to access credit. A range of microfinance
packages is required to meet the needs of the poorest, both women and men. Donors need to
revisit arguments about the sustainability of microfinance programmes. Financial
sustainability must be balanced against the need to ensure that some credit packages are
accessible to the poorest.

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R.Prabhavathy (2012)
Has examined that collective strategies beyond micro-credit to increase the endowments of
the poor/women enhance their exchange outcomes the family, markets, state and community,
and socio-cultural and political spaces are required for both poverty reduction and women
empowerment. Even though there were many benefits due to micro-finance towards women
empowerment and poverty alleviation, there are some concerns. First, these are dependent on
the programmatic and institutional strategies adopted by the intermediaries, second, there are
limits to how far micro-credit interventions can alone reach the ultra-poor, third the extent of
positive results varies across household headship, caste and religion and fourth the regulation
of both public and private infrastructure in the context of LPG to sustain the benefits of social
service providers.
Reginald Indon (2007)
Has examined that informal businesses represent a very large cross-section of economic
enterprises operating in the country. Informal businesses may be classified as either the
livelihood/ survival type or the entrepreneurial/ growth-oriented type. Livelihood enterprises
are those which show very limited potential for growth in both income and employment
generation. There are existing policies, program and services that directly/ indirectly cover
informal. Variety of support programs, services and information are currently being offered
by different institutions. These programs and support services fail to reach or remain
inaccessible to informal business operators and owners. This is borne out of and perpetuated
by lopsided economic policies and poor governance that inadvertently encumber informal
businesses from accessing mainstream resources and services.
Mallory A. Owen (2006)
Has examined that microfinance has signaled a paradigm shift in development ideology.
Using my experiences with microfinance in a fishing village in Senegal, this study will
address the claims driving the microfinance movement, debate its pros and cons and pose
further questions about its validity and widespread implementation. Instead of lifting people
out of poverty and empowering women, microfinance may have regressive long term
potential for borrowers. How loans get used is a central theme of this essay. How
microfinance and the notion of the entrepreneur fit into the rural, Senegalese cultural
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context is also addressed. Microfinance programs should be implemented with
complementary measures that challenge the systematic causes of inequality examined in this
article. The microfinance model (group lending based on joint liability) uses the social capital
generated by group membership to ensure that loans get re-financed. If one woman fails to
pay back her loan, she puts her entire loan group at jeopardy. As a result, Womens
participation in microenterprise does not show any signs of creating the new forms of
solidarity among women that the advocates of empowerment desire. Instead, women are
placed under enormous pressure to maintain existing modes of social relationships, on which
depends not only the high rates of loan repayments but also the survival of families.
Jennifer Meehan (2004)
Has examined that it will need to do three things simultaneously. First, it will need to rapidly
scale up, in key markets, like India, home to high numbers of the worlds poor. Second, in
this process, clear priority is needed for philanthropic, quasi-commercial and commercial
financing for the business plans of MFIs targeting the poorest segments of the population,
especially women. Third, microfinance will need to realize its possibility as a broad platform
and movement, more than simply an intervention and industry. The pioneering financings
completed by leading, poverty-focused MFIs have shown the industry what is possible
large amounts of financing that allows for rapid expansion of financial services to new poor
customers. The MFIs offer a model to others that are interested in tapping the financial
markets. If leading MFIs continue on their present course and adopt some or all of the
suggestions offered, financial market interest or more specifically, debt capital market
interest in leading, poverty-focused MFIs is expected to grow.
Jacob Levitsky and Leny van Oyen (1999)
Has examined that micro-businesses to large corporations, located in large urban centres, in
rural areas and in the formal and informal sectors. Financing needs are therefore of varying
nature. In describing experiences, a link is made between size of enterprises, financing
schemes/instruments and typical delivery channels. When referring to enterprises in this
paper, focus is predominantly on businesses, both existing and potential, in the manufacturing
sector and related services. It is clear from this paper that increasing the volume of finance
available and the delivery of such funds in various appropriate forms, to support enterprises
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in Africa, is a difficult challenge. Central banks have to be given more independence,
strengthened with qualified, experienced personnel, able to fulfil adequately the role of
supervising and monitoring the performance of commercial banks in the provision of loans to
those enterprises able to make effective use of them. Formal financial institutions such as
commercial banks and, in a few cases, development banks, have to be encouraged and
pressed to make appropriate loans to those who have proved themselves by paying off a
number of loans they have received from NGOs or from formal financial institutions. The
minimalist credit approach has clear limitations, and for credit schemes to be effective and
have impact, complementary services are needed.
Marguerite S. Robinson (1995)
Has examined that HIID's role in the formulation of the initial hypotheses and HIID's
contributions in planning and coordinating the underlying research, advising on the policies
and implementation strategies that put concept into practice, analysing the results, and
disseminating the findings. Drawing on work in Asia, Africa, and Latin America, the paper
analyses the paradigm shift in microfinance from government and donor-funded subsidized
credit to sustainable financial intermediation. This shift has occurred because of the work of
many people in many countries. This paper, however, is limited to HIID's contribution. The
policy implications of the 'new microfinance' for governments, donors, banks, and NGOs are
explored. HIID is advising BRI on its program for international visitors. In addition, HIID is
analysing and teaching - in universities, financial institutions, donor agencies, bank
superintendences, and NGOs - the principles and the results of the new microfinance
paradigm.
Pillai (1995)
Has examined that the emergence of liberalization and globalization in early 1990's
aggravated the problem of women workers in unorganized sectors from bad to worse as most
of the women who were engaged in various self-employment activities have lost their
livelihood. Microfinance is emerging as a powerful instrument for poverty alleviation in the
new economy. In India, Microfinance scene is dominated by Self Help Group (SHGs)-Bank
Linkage Programme as a cost effective mechanism for providing financial services to the
"Unreached Poor" which has been successful not only in meeting financial needs of the rural
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poor women but also in strengthening collective self-help capacities of the poor leading to
their empowerment. Micro finance is necessary to overcome exploitation, create confidence
for economic self-reliance of the rural poor, particularly among rural women who are mostly
invisible in the social structure. Micro finance can contribute to solving the problems of
inadequate housing and urban services as an integral part of poverty alleviation programmes.
The challenge lies in finding the level of flexibility in the credit instrument that could make it
match the multiple credit requirements of the low income borrower without imposing
unbearably high cost of monitoring its end use upon the lenders.
Crabb, P. (2008)
Has examined that the relationship between the success of microfinance institutions and the
degree of economic freedom in their host countries. Many microfinance institutions are
currently not self-sustaining and research suggests that the economic environment in which
the institution operates is an important factor in the ability of the institution to reach this goal,
furthering its mission of outreach to the poor. The sustainability of the micro lending
institutions is analyzed here using a large cross-section of institutions and countries. The
results show that microfinance institutions operate primarily in countries with a relatively low
degree of overall economic freedom and that various economic policy factors are important
to sustainability.
Fehr, D. and G. Hishigsuren. (2006)
Has examined that microfinance institutions (MFIs) provide financial services to the poorest
households. To date, funding of MFI activities has come primarily from outright donor
grants, government subsidies, and often debt capital, including debt with non-market terms
favorable to the MFI. These traditional sources of MFI financing may not be sufficient to
allow MFIs to provide maximum services. There is a subset of the pool of mainstream equity
investors who would consider investing in MFI opportunities, even knowing that they would
not expect to earn the full economic rate of return that such investments would otherwise
require. However, as part of their investment evaluation process, these investors would ask:
What would the market determine required expected rate of return for my MFI investment
be? What return on investment (ROI) do I expect to earn on my MFI investment? Is the
difference in the above two returns acceptable given my level of social motivation? How will
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I "monetize" my investment and when? The purpose of this article is to employ modern
corporate finance techniques to address these questions.
Demirguc-Kunt, A. and Martinez, P.M.S. (2005)
Has examined that this paper (i) presents new indicators of banking sector penetration across
99 countries, based on a survey of bank regulatory authorities, (ii) shows that these indicators
predict household and firm use of banking services, (iii) explores the association between the
outreach indicators and measures of financial, institutional, and infrastructure development
across countries, and (iv) relates these banking outreach indicators to measures of firms
financing constraints. In particular, we find that greater outreach is correlated with standard
measures of financial development, as well as with economic activity. Controlling for these
factors, we find that better communication and transport infrastructure, and better governance
are also associated with greater outreach. Government ownership of financial institutions
translates into lower access, while more concentrated banking systems are associated with
greater outreach. Finally, firms in countries with higher branch and ATM penetration and
higher use of loan services report lower financing obstacles, thus linking banking sector
outreach to the alleviation of firms financing constraints.
Srinivasan, Sunderasan (2007)
Has examined that micro banking facilities have helped large numbers of developing country
nationals by supporting the establishment and growth of microenterprises. And yet, the
microfinance movement has grown on the back of passive replication and needs to be
revitalised with new product offerings and innovative service delivery. Renewable Energy
systems viz., solar home systems, biogas digesters, etc., serve to improve indoor air quality,
provide superior light and extend working and study hours. Such applications are not
inherently income generating and returns on such investments accrue from cost avoidance,
but should qualify for micro funding, as such 'quality of life' investments, reflect borrower
maturity and simultaneously contribute to MFI sustainability.
Basu, P., Srivastava (2005)
Has examined that the current level and pattern of access to finance for India's rural poor and
examines some of the key microfinance approaches in India, taking a close look at the most
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dominant among these, the Self Help Group (SHG) Bank Linkage initiative. It empirically
analyzes the success with which SHG Bank Linkage has been able to reach the poor,
examines the reasons behind this, and the lessons learned. The analysis in the paper draws
heavily on a recent rural access to finance survey of 6,000 households in India, undertaken by
the authors. The main findings and implications of the paper are as follows: India's rural poor
currently have very little access to finance from formal sources. Microfinance approaches
have tried to fill the gap. Among these, the growth of SHG Bank Linkage has been
particularly remarkable, but outreach remains modest in terms of the proportion of poor
households served. The paper recommends that, if SHG Bank Linkage is to be scaled-up to
offer mass access to finance for the rural poor, then much more attention will need to be paid
towards: the promotion of high quality SHGs that are sustainable, clear targeting of clients,
and ensuring that banks linked to SHGs price loans at cost-covering levels. At the same time,
the paper argues that, in an economy as vast and varied as India's, there is scope for diverse
microfinance approaches to coexist. Private sector micro financiers need to acquire greater
professionalism, and the government, too, can help by creating a flexible architecture for
microfinance innovations, including through a more enabling policy, legal and regulatory
framework. Finally, the paper argues that, while microfinance can, at minimum, serve as a
quick way to deliver finance to the poor, the medium-term strategy to scale-up access to
finance for the poor should be to 'graduate' microfinance clients to formal financial
institutions. The paper offers some suggestions on what it would take to reform these
institutions with an eye to improving access for the poor.
Robinson, M. (2001)
Has examined that the timing of this book is excellent it has few close substitutes in terms of
its sweeping overview of the terrain, and the revolution is now so advanced that the time is
right for a history, or at least a retrospective. As with any revolution, however, splits have
emerged within the movement. On one side are those who argue that the way forward is to
require microfinance institutions to meet the test of financial sustainability essentially,
requiring these institutions to cover their costs, even if this means that the very poorest of the
poor remain under-served. Against this, the poverty lending approach emphasizes the
importance of outreach, especially to the very poorest borrowers, as a poverty fighting
approach.
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Gallardo, Joselito (1999)
Has examined that the Bank should maximize opportunities to expand the use of leasing as an
approach to financial intermediation in Bank projects to promote the development of small
businesses and microenterprises. In most developing countries, capital markets are relatively
undeveloped and banks are often unable or unwilling to undertake term lending. Operations
in microenterprises and small businesses are cash-flow-oriented but rarely have organized
historical financial records or the assets needed for collateral for conventional bank financing.
Gallardo explores the potential of leasing as an option to expand small businesses' access to
medium-term financing for capital equipment and new technology. In a lease-financing
contract, the lessor-financier retains ownership of the asset, lease payments can be tailored to
fit the cash-flow generation patterns of the lessee-borrower's business, and the security
deposit is smaller than the equity stake required in conventional bank financing. Other small
businesses require medium-term financing to acquire the tools and equipment needed to
support production growth and expansion. Gallardo examines and compares the Bank's
experience: Lease financing was used to promote the development of small businesses in
Pakistan, as part of a microenterprise development loan project. For a Bank-supported
alternative-energy project in Indonesia, a variant of lease financing-the hire-purchase
contract-is being used in marketing and distribution by private distributors of photovoltaic
solar home systems. Lease financing was used by Grameen Trust in Bangladesh to finance
the purchase of small tools and equipment and in other countries to promote the growth of
alternative energy systems. This paper-a product of the Development Research Group-is part
of a larger effort in the group to identify appropriate policies for environmental regulation in
developing countries. The study was funded by the Bank's Research Support Budget under
the research project "The Economics of Industrial Pollution Control in Developing
Countries"
Muhammad Yunus (1998)
Has examined that this approach to poverty reduction at the macro-level is inadequate. The
primary causes of poverty are not lack of human capital or lack of demand for labor. Lack of
demand for labor is only a symptom, not a cause, of poverty. Poverty is caused by our
inadequate understanding of human capabilities and by our failure to create enabling
theoretical frameworks, concepts, institutions and policies to support those capabilities. My
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main argument is that economics as we know it is not only unhelpful in getting the poor out
of poverty; it may even be a hindrance. In this paper, I would like to explore those institutions
that perpetuate poverty, share my experiences with an effective poverty alleviation
institution, and present my thoughts on the future of poverty alleviation. Before addressing
these points, however, I would like to provide a useful framework to define the concept of
"the poor" more concretely.
Ashta, A. & De Selva, R. (2009)
Hass examined that the relationship between microfinance and religion, and provides future
research directions in this area. Religious institutions often play a crucial role in establishing
microfinance systems, but interactions between microfinance and religion have received little
attention of researchers. Some of the topics addressed by articles reviewed in this paper
include the impact of the Great Irish Famine on Irish loan funds, indigenization within
support groups for chronically ill Haitian women, impact of religion on borrowing patterns of
Jordanian micro-entrepreneurs, Islamic microfinance in Pakistan and Indonesia, spirituality
as an asset in a Christian initiative role of religious leaders in identifying entrepreneurial
talent, microfinance and charity in Thailand and the Philippines, and extensive socio-
economic studies in Bangladesh and India.
Ernest Aryeetey (2005)
Has examined that informal finance and microfinance suitable for financing growing small to
medium size enterprises (SMEs) in Sub-Saharan Africa? First, I present the characteristics of
informal finance, focusing on size, structure, and scope of activities. Informal finance has not
been very attractive for the private sector. Indeed, the informal sector has considerable
experience and knowledge about dealing with small borrowers, but there are significant
limitations to what it can lend to growing microbusinesses. Second, I discuss some recent
trends in microfinance. While externally driven microfinance projects have surfaced in
Africa, their performance relative to small business finance has not been as positive as in
Asia and Latin America. Third, I introduce some possible steps toward a new reform agenda
that will make informal and microfinance relevant to private sector development, including
focusing on links among formal, semi-formal and informal finance and how these links can
be developed.
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Yunus (2003)
Has examined that count 130 McMaster School for Advancing Humanity on women to
spread the word to their neighbors and friends about the success of these loans. The testimony
is expected to convince others to seek out Grameen for help. Yunus also encourages members
to save some of their money in case they fall on hard times, such as natural disasters, or to
use this money for other opportunities. In 1977, Yunus founded Grameen Bank after working
for six months to get a loan from the Janata Bank. Yunus realized that having groups of
people take out a loan was a better plan for success than giving loans to individuals. He
describes the process by which Grameen Bank lends money. Loan repayments are to be made
in very small amounts, and in the first project, Yunus chose a villager to be in charge of
collecting the repayments.
Monique Cohen (2002)
Has examined that the ideas presented in this paper are designed to direct the arena of
discourse towards a more holistic market driven or client focused microfinance agenda.
Currently, the debate on market-driven microfinance is primarily framed by the problems of
competition and dropouts among established MFIs. The solutions to the problems are defined
in terms of more responsive products, the creation of new products, and the restructuring of
existing ones. Appropriate products will not only benefit the operations of an institution they
will also have a positive impact on the wellbeing of the client, reducing the risk of borrowing
and the poors vulnerability. In presenting current thinking on a client-led agenda, this paper
finds itself in a precarious position in the midst of this debate. Client-led models are still in
their infancy, and the fact that this topic is the theme of this special edition of the Journal of
Development Studies is itself an important milestone. When this author began to focus on
clients in microfinance six years ago, the notion that clients deserved a voice in the design
and delivery of services was dismissed out of hand.
Shannon Doocy, Dan Norell, ShimelesTeffera, and Gilbert Burnham (2005)
Has examined that Management decision making in MFIs is becoming increasingly tied to
collecting information about social performance. This paper examines the impact of
participation in an Ethiopian microfinance program on indicators of socioeconomic status
including wealth, income, and home or land ownership. A survey assessing these outcomes
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was conducted in May 2003 in two predominantly rural sites in Southern Ethiopia and
included 819 households. The article discusses management decisions made as the result of
survey findings about socioeconomic status and food security to increase retention rates and
to facilitate client savings. Additionally, the management was prompted to increase the
number of female clients and raise the proportion of female loan officers. This paper
illustrates how data from routine monitoring and evaluation can be linked to MFI
management decision making, which ultimately results in providing better microfinance
services. Household asset data indicates that participation in the WISDOM microfinance
program did not result in increased household wealth. Significant differences in household
income were not observed between participant groups in either survey site and client status
was not a significant predictor of income in univariate or multivariate regression models.
John A. Brett. (2006)
Has examined that having borrowed money from a microfinance organization to start a small
business, many women in El Alto, Bolivia are unable to generate sufficient income to repay
their loans and so must draw upon household resources. Working from the women's
experience and words, this article explores the range of factors that condition and constrain
their success as entrepreneurs. The central theme is that while providing the poor access to
credit is currently very popular in development circles, the social and structural context
within which some women operate so strongly constrains their productive activity that they
realize a net income loss at the household level instead of the promised benefits of
entrepreneurship. This paper explores the social and structural realities in which women seek
out and accept debt beyond their capacity to repay from the proceeds of their business
enterprise. By examining some of the "hidden costs" of microfinance participation, this paper
argues for a shift from evaluation on outcomes at the institutional level to outcomes at the
household level to identify the forces and factors that condition women's success as micro-
entrepreneurs. While there has been much discussion on the benefits of microcredit lending
and increasing critique of it on both ideological and substantive grounds, there have been few
ethnographically informed studies on consequences to users.


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NidhiyaMenon (2006)
Has examined that this paper studies the benefits of participation in micro-finance programs,
where benefits are measured in terms of the ability to smooth the effect of seasonal shocks
that cause consumption fluctuations. It is shown that although membership in these programs
is an effective instrument in combating inter-seasonal consumption differences, there is a
threshold level of length of participation beyond which benefits begin to diminish. Returns
from membership are modelled using an Euler equation approach. Fixed effects non-linear
least squares estimation of parameters using data from 24 villages of the Grameen Bank
suggests that returns to participation, as measured by the ability to smooth seasonal shocks,
begin to decline after approximately two years of membership. This implies that membership
alone no longer has a mitigating marginal effect on seasonal shocks to per capita
consumption after four years of participation. Such patterns suggest that the ability to smooth
consumption as a function of length of membership, need not accrue indefinitely in a linear
fashion.; Reprinted by permission of Frank Cass & Co. Ltd.








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Area of Study
ULHASNAGAR a small town somewhere in thane district. A PLACE which is nowhere left
behind. A PLACE full of crowd with mostly SINDHI COMMUNITY and other communities
too. A PLACE where doing business is in the BLOOD of people living here.
ULHASNAGAR being called as BUSINESS HUB, divided in five camps , nearby
ambernath and kalyan.
Ulhasnagar, which is once a military camp area for Sindhi refugees migrated from
Pakistan, is now heavily populated with this community people. The city is also known as
Sindhunagar and it is very famous from economic aspect. Ulhasnagar is a very good
business centre not only in Thane district, but also in Maharashtra State. It is a city located on
the coast of West India, which is nearly 60 kilometers northeast of the city of Mumbai.
Birla temple, furniture market, gajanand market, jeans market, Century rayon factory, shiv
mandir etc are the important places in Ulhasnagar.
Brief description:
Ulhasnagar-1 (W): It is also known as Ulhasnagar camp-1 and it is located on the west side
of railway stations. The main center here is a market with famous landmarks like Goal
maindan where many people visit from nearby areas like kalyan, ambernath, badalpur,
dombivili, thane, titvala etc for shopping.

Ulhasnagar-2 (W): The other name of this place is Ulhasnagar Camp-2. It is a market with
popular landmarks like Gajanand market and it is famous for clothing, electrical and
electronics etc. Nehru Chowk is the main centre here.

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Ulhasnagar-3 (W): it has another name as Ulhasnagar Camp-3. It is mainly a market and it is
located on the west side of railway stations. The famous landmarks here are furniture bazaar,
RKT College, Sapna theatre, Ashok-Anil Multiplex etc. it is mainly a furniture and
electronics market.

Ulhasnagar 5 (E): This locality, which is also known as Ulhasnagar Camp-5, is located on
the eastern side of railway stations and it is mainly a residential area. You can see several
jean making small scale industries here. Jhulelal Mandir, Swami Sarvanand School, Swami
Shantiprakash Chowk, Nethaji Garden, etc are the famous landmarks here. This locality is
heavily populated with Sindhi community people.
Originally, known as Kalyan Military transit camp (or Kalyan Camp), Ulhasnagar was set
up especially to accommodate 6,000 soldiers and 30,000 others during World War II.
Sindhis, in particular, began life anew in the new land. The area was converted into a
township in 1949, and named Ulhasnagar by the then Governor-general of India, C.
Rajagopalachari (literally 'city of joy'; ulhas = joy; nagar = city). On August 8, 1949 the first
and last Governor-General of India, C. Rajagopalachari, laid the foundation stone.
As said earlier, ULHANAGAR is a place which is nowhere left behind because each and
everything is available here, as it is good in providing services like EDUCATION,
HOSPITALITY, BANKING AND INSURANCE SECTOR, TOURS AND TRAVELS,
BEING IMPROVED IN INFRASTUCTURE ALSO , ETC.
Education:
The city has colleges and an industrial-training institute like institute of technology, Holy
family Convent High School, New English (at camp no.5), SST College of Arts and
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Commerce etc. Smt. Chandibai Himatmal Mansukhani college and R. K. Talreja are two
major colleges.
Growth:
Ulhasnagar, one of the busiest business centers in Maharashtra, has several jewellery
showrooms. Some of the popular jewellery showrooms in the city are listed here.
We can watch the gradual development of Ulhasnagar to a shopping hub and business centre
from a military camp area in the pre-independence era only with wonder. Sindhis, who
migrated to this land from Pakistan, has significant role in the growth of Ulhasnagar in the
business field. Even though they came to the city with minimal resources, now most of the
small and big shops in Ulhasnagar are under owned by them. It is nothing else but their hard
work and talent that made them able to develop this city to a mini-Japan during the last five
decades.
Specialities:
Ulhasnagar, which is the most popular industrial and commercial township of Thane district,
is famous for shops of wedding costumes, jeans and other readymade garments. Sindhi
people, who live other parts of India such as Gujarat, Goa and Madhya Pradesh, visit
Ulhasnagar to do their wedding purchase. There are many shops, which are exclusively
aimed for wedding costumes
The city is also famous for jeans manufacturing. Jeans and ready made garments
manufactures at Ulhasnagar 5 are sold in all markets of the country. Many popular jeans
brand have factories in Ulhasnagar.
The most busy commercial and shopping center here are Ulhasnagar 2 & 3.
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Tourist Attractions in Ulhasnagar:
There are several tourist attractions in Ulhasnagar including beautiful locations, religious
places and historical monuments etc. Some of the famous temples in Ulhasnagar including
Chaliho Sahib, Birla Mandir, haji Malang, Jhulelal Temple, Saint Satram Dham and
Swami Shanti Prakash Temple etc.
ICICI Bank launches new initiative in micro-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. NachiketMor, Deputy Managing Director, ICICI Bank, FINO is an
independent entity. "We would reduce our stake in the company when required," he
said.
ICICI Bank expects to target 200 micro-finance institutions (MFIs) by March 2007,
he said, speaking on the sidelines of the press conference to launch FINO. At present,
the bank has tie-ups with 100 MFIs.
FINO is an initiative in the micro-finance sector. It would target 300-400 million
people who do not have access to basic financial services, said Mr. Manish Khera,
CEO, FINO. The company has an authorized capital of Rs.50 crore. MFIs, NBFCs,
RRBs, co-operative banks, etc. would directly or indirectly tie up with FINO to use its
services, he said. FINO would charge Rs.25-30 per account every year.