Concept, Scope and limitations

!7esented By
Name: Dipika Lalwani
Roll No : 1017
Sub: Economics
MMS 1st Yea7
n this discussion we a7e t7ying to
unde7stand
!ove7ty
What is Mic7ofinance?
t's o7igin
!ove7ty and mic7o-c7edit
!7ocess of mic7o-c7edit
Advantages of mic7o-c7edit
L and g7oup lending model
Social mpact of Mic7ofinance
Scope and Limitations of Mic7ofinance
!ove7ty
!ove7ty means being
unable to affo7d basic
human needs, such
as clean wate7,
nut7ition, health ca7e,
education, clothing
and shelte7
!ove7ty; 2 Types
Absolute !ove7ty o7
destitution
Relative !ove7ty
is the condition of having fewe7
7esou7ces o7 less income than
othe7s within a society o7
count7y, o7 compa7ed to
wo7ldwide ave7ages
What is mic7ofinance ?
Mic7o finance is the
p7ovision of financial
se7vices - To those who
a7e excluded f7om
conventional comme7cial
financial se7vices
Because they a7e too
poo7 to offe7 much - o7
anything - in the way of
collate7al
What is mic7ofinance ?
t p7esents a se7ies of
exciting possibilities
fo7:
Extending ma7kets,
7educing pove7ty
and
Foste7ing social
change
7igin of Mic7ofinance
The concept of mic7o finance o7iginated in
the mid-1970s in Bangladesh th7ough a
pionee7ing expe7iment by D7 Muhammad
Yunus, then a !7ofesso7 of Economics
7igin of Mic7ofinance
D7 Mohammad Yunus
Established Bangladesh
7ameen Bank to:-
!7oviding financial
se7vices and
ent7ep7eneu7ship
oppo7tunities to poo7
So they could p7oduce,
manage and maintain
thei7 own finances
t was an end to
mist7eatment by money
lende7s
Mic7o-c7edit
s the most common fo7m of Mic7ofinance
t means the p7ovision of small loans to
ent7ep7eneu7s who a7e too poo7 to qualify
fo7 conventional bank loans
!7ocess of Mic7o Loan
dist7ibution
A mic7o c7edit
p7og7am gives small
loans to the poo7 so
that they can p7ocu7e
whateve7 they need to
sta7t a small local
business of thei7
choice
!7ocess of Mic7o Loan
dist7ibution
A mic7o loan of
Rs000 - 20000 at 1
o7 1 inte7est pe7
month, can empowe7
people to sta7t thei7
own business
!7ocess of Mic7o Loan
dist7ibution
By that money they
can sta7t business of:
A Ki7ana Shop
A bangles shop
Buy a cow o7 buffalo to sell milk
Candle Making
Small ga7ments manufactu7ing unit
F7uit and vegetable shop
!7ocess of Mic7o Loan
dist7ibution
n the absence of
collate7al, the loans
a7e made to g7oups of
five, mostly women,
who gua7antee each
othe7s' loans
Called Joint liability
7oup (JL
!7ocess of Mic7o Loan
dist7ibution
f a woman wants to
7eceive a loan and if
he7 idea fo7 a
business is accepted,
she is encou7aged to
find fou7 othe7 women
and fo7m a g7oup
!7ocess of Mic7o Loan
dist7ibution
Then, the fi7st two women
a7e given loans and the
othe7s a7e encou7aged to
help them make thei7
ente7p7ise a success
Afte7 about 6 weeks, if
the fi7st two a7e making
thei7 payments on time,
the next two women get
thei7 loans and six weeks
late7 the last one
!7ocess of Mic7o Loan
dist7ibution
All pe7sons who have
paid back a fi7st loan,
a7e automatically
eligible fo7 a second
loan and eventually a
thi7d so thei7
businesses can g7ow
!7ocess of Mic7o Loan
dist7ibution
At the same time f7om
the inte7est, the loan
fund is g7owing,
though slowly, and
loans a7e available to
mo7e pe7sons
!7ocess of Mic7o Loan
dist7ibution
f one does not pay
back one's loan, no
one in the g7oup will
7eceive a second loan
!7ocess of Mic7o Loan
dist7ibution
To gua7d against
eme7gencies, such as
one's cow dying and not
being able to 7epay the
loan, an eme7gency fund
is set up at the time of the
fi7st loan This simply
means that a few coins,
pe7haps an additional
7oup Lending Model
The Most successful mic7o-c7edit concept
A ve7y disciplined and systematic model
t simply means bo77owe7s take each
othe7's gua7antee fo7 the 7epayment of
loan
7oup Lending Model
Fi7st, All potential
bo77owe7s unde7go
financial lite7acy
t7aining and must
pass a test befo7e
they a7e allowed to
take out loans
7oup Lending Model
Weekly meetings with
bo77owe7s follow a
highly disciplined
app7oach
Re-payment 7ates on
these collate7al-f7ee
loans a7e as high as
99 because of this
systematic p7ocess
Social mpact of Mic7ofinance
The empowe7ment of
women
As the mic7ofinance
se7vices mostly
offe7ed to women;
they a7e now mo7e
financially lite7ate and
confident
Social mpact of Mic7ofinance
Building Economic citizenship
Financial se7vices foste7 ndependence Mic7ofinance
can help clients to g7ow mo7e confident and with that
economic citizenship they can step out and become a
pa7t of main st7eam of society
Social mpact of Mic7ofinance
To fight with pove7ty
Financial se7vices
give clients to
access to
education,
healthca7e, and
othe7 necessities
that imp7oves thei7
quality of life ie
school fee loan,
health insu7ance
Social mpact of Mic7ofinance
No7mally f a poo7 household loses a sou7ce of
income he might have to withd7aw a child f7om
school o7 selling valuable assets o7 fall deep into
pove7ty
Social mpact of Mic7ofinance
p7otecting against
vulne7abilities
Financial se7vices like
saving, c7edits and
insu7ance p7ovide
sustainable and low cost
coping st7ategies
They can 7e-build the7e
assets o7 alte7nate
sou7ce of income without
falling in pove7ty
Scope of Mic7ofinance
n ndia, Mic7o finance is g7owing faste7 than
banking and, if the expe7ience in othe7
developing count7ies is mi77o7ed he7e,
mic7ofinance "will 7each mo7e individuals than
the banking secto7,
- Robe7t Annibale, global di7ecto7 Citig7oup nc
Mic7ofinance
Scope of Mic7ofinance
0
5
10
15
20
25
30
35
2008 2010 2015
Banking
Microfinance
N
o
s

o
f

C
l
i
e
n
t
s

i
n

M
i
l
l
i
o
n
s
*Fo7 201 the p7ojection sou7ced f7om citig7oup mic7ofinance
Top Mic7ofinance Cos n ndia
SKS Mic7ofinance Ltd
Basics Mic7ofinance Ltd
$are Microfin Limited $5andana $5oorty
FinanciaI Ltd ($$FL)
Asmita Microfin Ltd
Bandan
And many mo7e
fo7 mo7e details please visit to http://businessmapsofindiacom
Limitations
Mic7o Loans should neve7 lends to individuals
without fi7st p7oviding them with the expe7tise
and t7aining to build a business plan that is likely
to succeed
Limitations
Mic7o finance is mainly intended fo7 social
investment with the focus on pove7ty
7eduction The utilization of funds depends
on the capacity of the poo7 clients
p7oductively use it, at bottom level towa7ds
c7eating a sustainable social impact
Limitations
Anothe7 point in this 7ega7d is that me7e flow of funds
alone in MF secto7 cannot b7ing desi7ed level of social
impact unless othe7 inf7ast7uctu7e is enough in the given
a7ea/7egion to abso7b the funds
Thank you!