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MICROFINANCE

Presented By
Sangeetha.S
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Microfinance

Provision of financial services to low

income clients

Loans Savings Insurance Remittance

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Microfinance Services Regulation Bill

Definition of Microfinance
“Providing financial assistance to an individual or an eligible client,

either directly or through a group mechanism for:

 An amount, not exceeding Rs.50,000 in aggregate per individual, for

small and tiny enterprise, agriculture, allied activities (including for

consumption purposes of such individual) or

 An amount not exceeding Rs.1,50,000 in aggregate per

individual for housing purposes”

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Forms of MFI
Type of entity Non-profit Mutual benefit For-profit
Association Society under Societies Cooperative which can Association of
Registration Act 1860 be just a savings and persons
Eg: SAMRUDHI Micro credit cooperative or be
Fin Society in further licensed as
Karnataka cooperative bank
Trust under Charitable trust Mutual benefit trust Investment trusts
Indian Eg:Mahasemam Trust
Trusts Act 1920 in Tamil Nadu
Company under Section 25 Company Mutual Benefit (Sec Company which is
Indian Eg: Cashpor in UP 620A Nidhi Company) further either an
Companies Act, NBFC or a bank
1956 Eg:Share
Microfinance in
State Maharashtra
No.of MFI's HO in the state 18
No.of MFI's HO & Branches 28
Client Outreach 1169306
Portfolio Outstanding 3840548354
No. of districts served 38
Out of which no. of poorest
districts 18
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Service Volumes
In the financial year 2007/08, Microfinance in India through its
two major channels – SHG-Bank Linkage Programme (SBLP)
and MFIs – served over 33 million Indians
Outstanding Portfolio (in Rs. Crore) FY 2007 FY
2008
SBLP* 10,644 16,900
Sa-Dhan, 223 MFIs 3,456 5,954
Total** 13,582 21,961
Client Outreach (in million persons)
SBLP* 16.01 21.57
Sa-Dhan, 223 MFIs 10.04 14.1
Total** 24.55 33.55
Bharat Microfinance Report - Quick-Data 2008
 Self-Help Group (SHG)
A Self-Help Group (SHG) is a registered or
unregistered group of 10-20 individuals having
Homogenous social and economic background
To save small amounts regularly
To mutually agree to contribute
To a common fund and
To meet their emergency needs on mutual help basis.
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Joint Liability Group(JLGs)

GENERAL ORGONOGRAM OF AN MFI

Internal
Auditor
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Branch Identification And Set Up

The area in consideration should have :
1. Proximity to the targeted villages
2.Availability of public transportation for staff
3.Proximity to bus stand, market place etc.
4.Easy access to local commercial banks
5.The availability of telephone and internet facility
6.Availability of proper building for the branch office
7.The distance and means of transportation to the
Head Office
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Branch Staffing Structure

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Registers and displays to be kept

in Branch Office
Sl No Name of the Register Description

1 Master Register Master Register contains the details of all

member/group registered with SMFL. On
registration of new group/member or on
dropping off the details of the group/member
is entered in the Master Register.

2 LAAD Index Register LAAD Index Register contains the details of

(Loan Application the Loan Application Agreements and
Agreements and Documents kept in the branch. This is used
Documents ) for the easy reference of LAAD in future.
3 Proposal Cum Disbursement Proposal cum disbursement register is used
register to track the status of loan request generated
in the branch till its disbursement.
4 Loan Committee Minutes Loan committee minutes contain the details
of loan sanctioned/rejected during the
deliberations in the Loan Committee
Meeting.
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Sl No Name of the Register Description

5 Inspection Register Inspection Register contains

comments/recommendations made by any senior
officer of SMFL during his/her visit to the branch.

6 Cash Book Cash book documents both cash receipts and

disbursements.
7 Ledger A book of accounts, in which the results of business
are arranged under various heads as described in
the Heads of accounts

8 Asset Register Asset Register is a record of items considered

worthy of identification as discrete assets. A
physical asset register includes information about
each asset, such as purchase cost, date of purchase
etc.

9 Stock Register Stock Register is a record of items stored in the

branch for distribution free or for cash like Pass
Book, Group Account Books, Loan Application,
Agreement and Documentation and other printed
materials.
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Sl No Name of the Register Description

10 Attendance Register Branch Manager should manage an

attendance book for the staff reporting to
him.

11 Movement Register Movement Register is used to track the staff

movement. Staff leaving out for any official
purpose has to declare the time and purpose

12 Inward – Outward Details of all in-coming and out-going

Register letters and e-mails are to be numbered and
entered in this register.

13 Receipt Book Details of receipt book issue are recorded in

Tracking Register this register
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Self Help Group

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CLIENT
IDENTIFICATION
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Basic Characteristics of Clients

Low & middle income group from the neighbourhood
Members should be women
Age bracket of 18 years to 55 years
No two women from same house hold can have
membership in same group
Group should have 10 to 15 members
Involved in a variety of income generation activities
Average house hold income of
 Rs. 1500 to Rs. 12000/- per month.
Illiterate/ semiliterate people
Un-banked segment
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Possible client Needs

Enterprise needs – mainly for development,
diversification and expansion of business
Health and education
Debt Redemption
Basic household consumption
Emergency Needs
Meeting housing needs - mainly for building /
repairing of houses
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P
R
O
C
E
S
S
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1. Group Formation:
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Promotional Meeting

Following topics are covered on day-1

About the MFI and its activities
Membership requirements
Goals of the group
Group Recognition Test (GRT)
Group registration procedures
Loan product details, loan documentation and
its repayment
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 Following topics are covered on day- 2
 Importance of the meeting
 Meeting Procedure
 Roles and Responsibilities of the group members and
group leaders.
 Books to be maintained in the group
 Attendance Book
 Individual Savings Card
 Group Savings Card
 Individual Loan Card
 Group Loan Card
 Loan Documentations
 Promissory Note – Group
 Promissory Note – Individual
 Inter-se Agreement
 Group Declaration
 Facility Agreement
 Group Receipt
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Immediately After The GRT, The

Following Documents Are Collected
1. Registration Form -Along with Photos,ID Proof
 The Field officer along with the members fill the reg.
Form
and admission fee
2. After collecting the fee ,spot receipt is given
3. Bye-laws are given-Group undertaking the
responsibility
4. Seal to be made
5. Individual pass books and a Sangam pass book
6. Sangam savings cum loan register
7. Minutes Book-(Fills during meeting days and
important in case of loan )
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2. Loan Application Process

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The following documents are collected

along with the application form
1. Loan application-both Sangam & individual
2. Loan Requisition Sheet
3. Interse agreement
4. Photo along with ID proof
5. Self Declaration
6. Minutes copy of the Sangam
7. In case of 2nd loan cycle-Grading sheet is submitted
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GROUP Loan
Loan
Cycle Loan Limit (Per member) Instalments
Tenure

1st Loan Cycle Maximum Rs. 8,000 50 Instalments 12 months

2nd Loan Cycle Maximum Rs, 12,000 50 Instalments 12 months

Loan Amount 3rd Loan Cycle Maximum Rs. 15,000 50 Instalments 12 months
(Product)
4th Loan Cycle Graduates to Individual loan product

Note:
Loans will be given in multiples of thousands only.
The figures given against each cycle are the maximum that can be availed
Loan amount will be sanctioned based on the member’s income generation activity
and the repayment capacity.

Interest Rate 15% per annum on a declining basis

Processing Fee 1% of loan amount collected upfront

Price Risk Fund 1% of loan amount collected upfront

1% on the due amount (instalment)
Penalty for the number of days for which the
amount was due
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3. Loan Disbursement Process

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4.Loan Repayment Process

Repayment begins within 11 days after disbursement

Loan duration-50 weeks/12 Months

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THANK YOU !