INTEREST FREE MICRO

FINANCE
B Y: P R O F. A B D U L R A S H E E D
(MBA, M.COM, MH-SET)
 PROBLEMS

Poverty
Unemployment
Inflation
Inefficient agriculture
 Business difficulties
Poor educational standards…….
 POVERTY
POVERTY IS ABOUT NOT HAVING ENOUGH MONEY TO MEET BASIC NEEDS
INCLUDING FOOD, CLOTHING AND SHELTER. 

• According to World Poverty Clock, the number of people who

are living in poverty is 97,697,747 (97.7 million) or roughly
6% of the population.

Total Population 1,392,506,368

People living in extreme
97,697,747
poverty
Males 44,806,455
Females 52,891,292
 UNEMPLOYMENT
UNEMPLOYMENT IS THE TERM FOR WHEN A PERSON WHO IS ACTIVELY SEEKING A JOB IS UNABLE

TO FIND WORK.

India has 53 million unemployed people as of December 2021 and a huge proportion
of them are women,

(CMIE)Centre for Monitoring Indian Economy

 SOLUTION –IFMF

• Microfinance offers poor people access to basic financial

services such as loans, savings, money transfer services and
micro-insurance (CGAP)

• Microfinance is a banking service provided to unemployed

or low-income individuals or groups who otherwise would
have no other access to financial services.

• Microfinance in India plays a major role in the

development of India. It act as an anti-poverty vaccine for
the people living in rural areas. 
 INCEPTION OF IFMF

• The inception of microfinance, began with an experiment

conducted by a professor in Bangladesh in 1976. To help the
poverty stricken and flooded village of Jobra in Bangladesh,
Professor Mohammad Yunus, a lecturer of economics at
Chittagong University, lent $27 each to a few women as working
capital without interest. What surprised him was the fact that these
women invested this money in their modest commercial enterprises
and were successful. They came back thanking him and returned
the borrowed amount. Thus, this small experiment started what was
to become a global revolution in microfinance.
 MICROFINANCE AND ITS IMPACT IN
DEVELOPMENT
• It:

• helps very poor households meet basic needs and protects against
risks,

• is associated with improvements in household economic welfare,

• helps to empower women by supporting women’s economic

participation and so promotes gender equity.
 IFMF

• Interest Microfinance provide support to poor families through

interest-free loans. IFMF empowers the poor to construct their
own out of poverty in a self-determined and sustained manner.

• These loans are primarily utilized to set up or expand

enterprises so that the poor through their own hard-work and
determination are able to emerge out of poverty.
• IFMF CAN END poverty but only if we all arm ourselves with
humility, compassion and sacrifice.
 4 BASIC MODEL OF IFMF
GRAMEEN BANK MODEL (GROUP LENDING):

• The model operates on the basis of group lending where members

of the group act as guarantors of each other and thus provide
collateral through this mechanism. The use of group members as
collateral minimises the risk of default by one group member as he
knows he will not be able to secure finance in the next round were
he to default on his payments. This is the most popular interest free
microfinance model implemented successfully by the Grameen
Bank in Bangladesh.
SHG
Self-help groups are groups
formed by people from
similar income levels coming
together to help each other.
The group members pool the
money together and extend
credit to whoever is in need.
 VILLAGE BANK MODEL:

• The village bank model consists of a group of approximately 30

individuals established by the microfinance institution (MFI) which
injects capital into the group for forward financing.

• The repayment of loans which have been lent forward by the group
members amongst themselves takes place on a weekly basis and after
four months all the loans along with the profit are returned to the MFI.
Subsequent loans depend on repayment by the village bank and the size
of these loans depends on the profit or savings returned to the bank. In
this instance, peer pressure leads to a lower risk of default and also
encourages greater savings to enjoy bigger loans in successive periods.
This may also lead the village bank to become self-sustaining by
accumulating internal capital.
 CREDIT UNION:

• Credit unions are non-profit committees formed by a group of

people who have a common bond. The union is controlled by
the members themselves who offer a range of services from
saving to credit extension and recovery.

• However, credit unions are generally linked to some body that

supervises, provides training, and monitors performance.
IFMF MODEL
IFMF INSTRUMENTS
 ALFALAH

year Beneficiary Amount disbursed Defaulters

2013-14 20 2 Million 0

2015-16 25 3 Million 0

2017-18 45 4 Million 0

2019-20 41 7 Million 0

2021-22 28 10 Million 0
 MHARASHTRA COLLEGE CO-
OPERATIVE CREDITN SOCIETY LTD
year Beneficiary Amount disbursed defaulters

2018-19 27 7.5 Million 0

2019-20 32 8 Million 0

2020-21 38 10 Million 0

Total 97 25.5 0
 BINISH INTEREST FREE MICRO
FINANCE (SINCE 2013)

Beneficiary Amount disbursed

1061 10,00,000
MANUTA NIDHI LTD (SINCE 2019)

Beneficiary Amount disbursed

179 5O,40,000
7 PRINCIPLES OF SOCIAL BUSINESS
QUESTIONS
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