Microfinance and Microentrepreneurship

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MICROFINANCE AND ENTREPRENEURSHIP: 

MICROFINANCE AND ENTREPRENEURSHIP RUBY GEETANJALI KASHMIRA SAMATA VIROJ

Slide 2: 

Case study Definition of Microfinance Stakeholders Scope of Microfinance Process of micro-credit Social Impact of Microfinance Problems faced by micro lenders Micro entrepreneur Micro enterprise Benefits of enterprises Problems faced by micro entrepreneurs SKS m icrofinance Contents

Slide 3: 

Mrs. Sujata, 48 years old Unemployed husband 4 children No savings Good cook Mrs. Sujata decides to start a small catering service at home Mrs.Sujata goes to the bank and makes a demand for a loan at her bank MRS. SUJATA’S DEMAND IS REJECTED Case study

Slide 4: 

Why are people excluded from certain financial services? Lack collateral or guarantors A bad credit history Gap in communication / lack of confidence in the banks Doubt of the bank of the repayment capacity Lack of access to financial infrastructure and services in remote areas WHAT IS THE ALTERNATIVE? MICROFINANCE !!

Slide 5: 

Regular contact and follow up between the MFI and the client Mrs. Sujata needs Rs 8,000

Slide 6: 

Microfinance is a tool against poverty by enabling the beneficiaries to : Create sustainable activities to increase their incomes Reduce external shocks Improve the living conditions of entrepreneurs and of their families Empower people and mainly the women Microfinance is the offer of financial & non-financial services to people excluded from the traditional banking system. The services are adapted to the needs of the target populations What is microfinance cntd

Slide 7: 

FINANCE MICRO Micro-entrepreneurs Self- employed Low income populations Excluded populations Business & educational loans Savings Micro- insurances Remittances Micro-entrepreneur training Coaching & workshops on health , hygiene , etc. What is microfinance?

Slide 8: 

Yunus’ idea Prof. Muhammed Yunus Founder of the Grameen Bank, Bangladesh On the field Prof. Yunus saw that Even poor people and women need loans They can have an activity and repay Set up financial institutions with a social mission Listen to the needs and constraints of the excluded & offer them adapted financial tools to empower themselves ( solidarity groups) Spirit: SUSTAINABILITY How did all start?

Evolution of Microfinance in India : 

Microfinance has been in practice for ages ( though informally). Legal framework for establishing the co-operative movement set up. Reserve Bank of India Act provided for the establishment of the Agricultural Credit Department. Nationalisation of banks. Regional Rural Banks created. NABARD established as an apex agency for rural finance. Passing of Mutually Aided Co-op. Act in AP in 1995. 1904 1934 1969 1975 1982 1995 1976 Grameen Bank, Yunus Evolution of Microfinance in India

Slide 10: 

MICROFINANCE INSTITUTIONS ( MFIs ) (NGO, ASSOCIATIONS & BANKS) COMMERCIAL BANKS & INVESTMENT FUNDS FOUNDATIONS & DONORS (incl. enterprises) GOVERNMENT & LOCAL BODIES SUPPORT ORANIZATIONS (e.g. PF) BENEFICIARIES Stakeholders

Services included: 

S ervices included Credit Savings/Deposits Insurance Plans Money Transfer

Process of Micro Loan distribution: 

Process of Micro Loan distribution Homogeneous groups of 5 members are formed at village level The field worker facilitates the process of group forming All the group members undergo a 7 day compulsory training Some groups undergo the group recognition test The centre meets every week at a defined time and a bank assistant attends the meetings.

Social impact of microfinance : 

Social impact of microfinance The empowerment of women Building Economic citizenship To fight against poverty

Top microfinance cos. in India: 

Top microfinance cos. in India SKS Microfinance Ltd. Basics Microfinance Ltd. Share Microfin Limited Spandana Sphoorty Financial Ltd (SSFL) Asmitha Microfin Ltd Bandhan

Scope of Microfinance: 

Scope of Microfinance In India, Micro finance is growing faster than banking No. of clients in millions For 2015 the projection sourced from citigroup microfinance

Problems faced by micro lenders : 

Problems faced by micro lenders Perceived High Risk of Micro Entrepreneurship and Small Businesses High Costs Involved in Small Transactions/Micro lending Lack of Debt and Equity Funds for MFIs to Pass on to the Poor Difficulty in Measuring the Social Performance of MFIs

Slide 18: 

Mixing Charity With Business Lack of Customized Solutions for the Poor Lack of microfinance training for Human Resource in Microfinance Institutions Poor Distribution System of Microfinance Institutions and lack of information about microfinance investment opportunities Dual mission of Microfinance Institutions to be Financially Sustainable as well as Development Oriented

Entrepreneur: 

Entrepreneur A person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome. A person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome.

Micro entrepreneur: 

Micro entrepreneur The owners of small businesses that have fewer than five employees. A micro entrepreneur is an owner,  whether single proprietorship, partnership, cooperative, or corporation of small business activity/enterprise engaged in industry, agribusiness/services that have 1 to 9 employees whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated.

Women entrepreneur: 

Women entrepreneur A"woman entrepreneur" is any woman who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk. An enterprise owned and controlled by one or more women having a minimum financial holding of 51% or more, giving 51% or more employment to women.

Schemes for women entrepreneurs : 

Schemes for women entrepreneurs Seed capital scheme National equity fund Prime minister’s employment guarantee scheme Single window scheme DIC scheme KVIC scheme Bank schemes for women entrepreneurs Mahila Arthik Vikas Mahamandal (MAVIM) Mahila Udyog Nidhi and Mahila Vikas Nidhi Priyadarshan Yojana

Women Entrepreneurship in India: 

Women Entrepreneurship in India States No of Units Registered No. of Women Entrepreneurs Percentage Tamil Nadu 9618 2930 30.36 Uttar Pradesh 7980 3180 39.84 Kerala 5487 2135 38.91 Punjab 4791 1618 33.77 Maharastra 4339 1394 32.12 Gujrat 3872 1538 39.72 Karnatka 3822 1026 26.84 Madhya Pradesh 2967 842 28.38 Other States & UTS 14576 4185 28.71 Total 57,452 18,848 32.82

Microenterprise: 

Microenterprise Microenterprise is a type of small business that is often unregistered and run by a poor individual. The terms Micro-enterprise and Micro-business have the same meaning, though traditionally when referring to a small business financed by micro credit the term microenterprise is used.

Some microenterprises: 

Some microenterprises Candle Making Fruit and vegetable shop A bangles shop Home made food items Farming & Dairy Condiments like masalas, pickles & jams Paper bags & Envelopes Small garments manufacturing unit Pottery

Micro Entrepreneurs from Micro Finance Clients : 

Micro Entrepreneurs from Micro Finance Clients In the absence of definite details it is assumed that normally micro finance is used by about 35% of clients for consumption and 65% of clients for enterprises, a majority for agro related business and a slim minority for non-traditional enterprises.

  Benefits of Micro Enterprises : 

Benefits of Micro Enterprises Help low income earning poor to escape poverty. Create Job opportunities as Micro enterprises encourage self, family and peer employment. No division of labour as means are meager and all roles have to be played by one

Slide 29: 

The poor’s inability to offer marketable collateral for loans Poor institutional viability of micro enterprises Lack of knowledge about microfinance services Problems faced by micro entrepreneurs

Slide 30: 

Inability to exploit growth opportunities Few organizational resources and poor governance Low bargaining power Vulnerability to economic shocks

Slide 31: 

Why Microfinance Can Change the Way the World Works 500 million poor entrepreneurs 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 32: 

SKS Microfinance Empowering the Poorest of the Poor to Become Self-Reliant Founded June 1998 Mission T o eradicate poverty by providing financial services to the poor and by using providing goods and services that the poor need. Vision T o serve 50 million households across India and other parts of the world and also to create a commercial microfinance model that delivers high value to our customers.

Slide 33: 

Achievements Since 1998 4 branches 314 village centers 10,123 customers $1.4 million disbursement $680,000 loan outstanding 99.9% repayment

Slide 40: 

Thank you