MICROFINANCE

GROUP 10
Deepti Achpalya-0918111
Krithika Varshini-09181
Namrata Narang-0918124
Nita Bhatacharjee-0918129
Shyamala Krishnamorthy-0918151
Vaishnavi Athappan-0918158
 WHAT IS MICROFINANCE
• Microfinance is the provision of financial
services to low-income clients, including
consumers and the self-employed, who
traditionally lack access to banking and related
services.

• Microfinance may encompass any efforts to

increase access to, or improve the quality of,
financial services poor people currently use or
could benefit from using.
 HISTORY OF MICROFINANCE

• Its traced back as long to the middle of 1800’s.

• The theorist Lysander Spooner was writing over the benefits

from small credits to entrepreneurs and farmers as a way for
getting people out of poverty.

• Today’s use of the expression micro financing has its roots

in the 1970s when organizations, such as Grameen Bank of
Bangladesh was introduced.
 NEED FOR MICROFINANCE

• Poor people need not just loans but also savings, insurance
and money transfer services.

• Microfinance must be useful to poor households: helping

them raise income, build up assets.

• Interest rate ceilings hurt poor people by preventing

microfinance institutions from covering their costs.
 NEED FOR MICROFINANCE

• “Microfinance can pay for itself.”Subsidies from

donors and government are scarce and uncertain.

• Microfinance also means integrating the financial

needs of poor people into a country’s mainstream
financial system.
DISTRIBUTION OF
MICROFINANCE
 GRAMEEN BANK (GB)

• Professor Muhammad Yunus, the founder of "Grameen

Bank" and its Managing Director.

• GB provides credit to the poorest of the poor in rural

Bangladesh, without any collateral. At GB, credit is a cost
effective weapon to fight poverty.
 CLASSIFICATION OF
MICROCREDIT
• Traditional informal microcredit (such as, moneylender's
credit, pawn shops, loans from friends and relatives,
consumer credit in informal market, etc.)
Microcredit based on traditional informal groups (such
as, tontin, su su, ROSCA, etc.)

• Activity-based microcredit through conventional or

specialised banks (such as, agricultural credit, livestock
credit, fisheries credit, handloom credit, etc.)
 CLASSIFICATION OF
MICROCREDIT

• Rural credit through specialised banks.

• Cooperative microcredit (cooperative credit, credit

union, savings and loan associations, savings banks,
etc.)

• Grameen type microcredit or Grameencredit.

CLASSIFICATION OF
MICROCREDIT
 IMPORTANCE OF
MICROFINANCE
• Microfinance is increasingly being considered as one of the
most effective tools of reducing poverty.

• Microfinance has a significant role in bridging the gap

between the formal financial institutions and the rural poor.

• The Micro Finance Institutions (MFIs) accesses financial

resources from the Banks and other mainstream Financial
Institutions and provide financial and support services to
the poor.
 GOALS OF MICROFINANCE
• To improve the quality of life of the poor.

• To be a viable financial institution developing

sustainable communities.

• To mobilize resources in order to provide

financial and support services to the poor,
particularly women.
 GOALS OF MICROFINANCE
• Learn and evaluate what helps people to move
out of poverty faster.

• To create opportunities for selfemployment.

• To train rural poor in simple skills and enable

them to utilize the available resources.
 WORKING METHODS OF MF
• They spread awareness
Among the women of the
Villages, and form groups
Of 5-6.

• They educate the group.

• Credit discipline is
maintained
 PRODUCTS COMMANLY USED

• Micro Savings

• Micro Insurance

• Micro Leasing

• Money Transfer
 MICROFINANCE IN INDIA
• DEMAND AND SUPPLY GAP:
$100 Billion
While there
has been
Significant
growth in
20x Growth access to
approx. Factor finance in
$5.2 Billion the
last decade,
Finance Finance there is still
a
Accessed Needed
huge unmet
By Poor By Poor
demand
Households Households
 IT AND MICROFINANCE

•Technology is essential to reach people,

controlling risks, make the business
sustainable and more effective.

•With Mobile phones, ATM machines

and other new innovations the
possibilities are unlimited to provide
financial services more efficient to poor
people.
 IT AND MICROFINANCE

“Point Of Sale” (POS) terminals can be computers,

bank card readers or even mobile phones. Already
many MFIS are using those tools to conduct business
with their clients.
 SURVEY RESULTS
AGE
BACKGROUND
30% 40 40
50%
em ploy
student
35
hom em aker 30 30
20%
25
20 20
age
15
10 10
5
0
18-20 20-30 30-40 40&ab

ANNUAL INCOME

20%
5k-1lakh
40%
1lakh-3lakh
3lakh-6lakh
25% 6lakh &above

15%
1. Awareness about 2. Awareness about grameen bank. 3. Scope of MF.
microfinance.
36%
30% yes
yes no
yes 48% 52% 64%
no
no

70%

4. Bank or MF? 5.Is interest rate appropriate in

MFI?
38%
banks
40%
m fi yes
62%
no
60%
6.Has MF helped in development of 7. Can MF help unemployed
Rural India? urban youth?

36%

ye s
no 40%
yes
64%
no
60%

8. Is MF a tool to
eradicate poverty?

14%

yes
no

86%
9.Growth of MF in future. 10. Does MF help in quick
delivery of finance to the
needy?
24%

40% good
ve r y g o o d
36%
lim ite d
yes
no
36% 64%

11. Is MF a tool to recover from recession?

24%

yes
no

76%
THANK YOU