MICRO FINANCE IN INDIA

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MICRO FINANCE IN INDIA:

MICRO FINANCE IN INDIA PRESENTED BY AKHILESH’S GROUP

Slide 2:

A microfinance institution is an organization that offers financial services to low income populations. Almost all give loans to their members, and many offer insurance, deposit and other services. A great scale of organizations is regarded as microfinance institutes. They are those that offer credits and other financial services to the representatives of poor strata of population (except for extremely poor strata). INTRODUCTION

Slide 3:

The core product of microfinance is microcredit: an extremely small loan to purchase productive assets boosting the poor's revenue allowing repayment over a short period of time in small installments without the guarantee of collateral . The size of the loan is small in three dimensions: 1. in absolute monetary values, as compared to typical business loan, so as to operate in a segment where there is no banking competition; 2. in relation to the borrower's income, so that payback is easier; 3. in respect to the lender's portfolio, so that the default of any single borrower has no impact on its financial soundness. CONCEPT

Slide 4:

Microfinance offers financial services to underprivileged people. Encourage Entrepreneurship and Self-Sufficiency Manage Risk Empower Women OBJECTIVES

Slide 5:

Why Microfinance Can Change the Way the World Works 500 million poor entrepreneurs and producers, mainly women 1. 4. 3. 2. Microfinance: Lending Savings Insurance Housing Remittances Increases: Income Assets Security Confidence in future Better: Health Population Education Community participation Banking for the majority

Slide 6:

Microfinance approach is based on certain proven truths which are not always recognized. These are: That the poor are bankable; successful initiatives in micro finance demonstrate that there need not be a trade off 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 - 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 - 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) - 'Peer pressure' in groups helps in improving recoveries. MFI APPROACH

Slide 7:

At present, all the regulatory aspects of microfinance are not centralized. For example, while the Rural Planning and Credit Department (RPCD) in RBI looks after rural lending, MF-NBFCs are under the control of the Department of Non-Banking Supervision (DNBS) and External Commercial Borrowings are looked after by the Foreign Exchange Department. The Committee feels that RBI may consider bringing UNIFYING REGULATORY OVERSIGHT

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1 Grameen Koota Microfinance institution in Karnataka, delivers need-based financial services to the poor & needy; offers income generation loans, insurance products in association with partners, conducts socio-economic development workshops, etc 2 Samrudhi Micro Fin Society Not-for-profit organisation in Gulbarga, Karnataka, formed to support socio-economic developmental activities of the rural & urban poor; provides livelihood based financial services to poor women by giving micro-loans, micro-insurance etc NAMES OF MFI’S IN KARNATAKA

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3 Ujjivan Microfinance institution engaged in providing financial services to the poor; it offers family loans, business loans, combo & housing loans, life & health insurance, health education pro grammes etc; based in Bangalore 4 Unitus Hybrid nonprofit organization providing the combined facilities of a venture capital firm, consulting firm & investment bank; headquartered in Redmond, Washington, its regional office is situated in Bangalore; also runs a Unitus Equity Fund Cont…………

Slide 10:

Microfinance Challenge 1: The poor’s inability to offer marketable collateral for loans Microfinance Challenge 2: Poor institutional viability of micro enterprises Microfinance Challenge 3: Lack of knowledge about microfinance services Microfinance Challenge 4: Shortage of Financial Capital – Or Misallocation? CHALLENGES

Slide 11:

SML provides access to financial resources to people excluded from the conventional, formal financial system. Rural Poor Women; Whose asset value is less than Rs. 20,000/- (US $ 444.44); Whose per capita income is less than Rs. 350/- (US $ 7.77) per month and Who live in poor housing conditions. TARGET

Creating a Secondary Market for Micro-finance:

Creating a Secondary Market for Micro-finance

Slide 13:

MFI HELP TO RURAL PEOPLE TO IMPROVE THEIR ECONOMIC STATUS. TO GIVE THEM BETTER AND JOY FULL LIFE, WITH BETTER ACCEPTANCE. BETTER PLATFORM TO MAXIMISED WITH URBAN AREA. IF MFI DECREASES THE LOAN INTREST RATE THAN POOR PEOPLE WILL GET MORE AND MORE PROFIT AND LIVE IN A BETTER LIFE. CONCLUSION