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Microfinance Mastery: Crafting a Winning Business Plan in India

• Author Content Team
• Published March 16, 2024

Microfinance has emerged as a powerful tool for financial inclusion and poverty alleviation in India. It involves providing small loans , savings , insurance , and other financial services to individuals and small businesses who lack access to traditional banking facilities.

The importance of microfinance in India can be attributed to the following reasons:

• Addressing Financial Exclusion : A significant portion of India’s population, especially in rural areas, remains unbanked and underserved by formal financial institutions.
• Empowering Women : Microfinance institutions (MFIs) have a strong focus on empowering women by providing them with access to credit and financial services, enabling them to start or expand their businesses and become financially independent.
• Promoting Entrepreneurship : Microfinance plays a crucial role in supporting small-scale entrepreneurship and self-employment opportunities, which are vital for economic growth and job creation in India.
• Poverty Reduction : By providing access to credit and other financial services, microfinance helps individuals and households improve their living standards , invest in education, healthcare, and other essential needs.

In India, microfinance has evolved from a niche sector to a well-recognized industry, with various models and stakeholders operating in the space, including:

• Non-Governmental Organizations (NGOs)
• Non-Banking Financial Companies (NBFCs)
• Small Finance Banks
• Self-Help Groups (SHGs)

As the microfinance industry continues to grow and mature, it is essential for new entrants and existing players to develop a comprehensive business plan that addresses the unique challenges and opportunities in this sector.

Key Components of a Microfinance Business Plan

A well-crafted business plan is crucial for the success of a microfinance company in India. It serves as a roadmap, outlining the company’s objectives , strategies, and operational details. The key components of a microfinance business plan include:

1. Executive Summary

The executive summary provides a concise overview of the entire business plan, highlighting the company’s mission, target market, products/services, competitive advantages, and financial projections. It should capture the essence of the plan and pique the reader’s interest.

2. Company Overview

In this section, you should provide background information about your microfinance company, including:

• Legal structure (e.g., non-profit, NBFC, or cooperative)
• Ownership and management team
• Company history and milestones (if applicable)
• Mission and vision statements

3. Products and Services

Clearly define the financial products and services your microfinance company plans to offer. These may include:

• Microcredit : Small loans for income-generating activities, consumption smoothing, or emergencies.
• Microsavings : Secure and accessible savings products for low-income individuals.
• Microinsurance : Affordable insurance products tailored to the needs of the target market.
• Financial literacy and training programs

4. Target Market and Customer Analysis

Conduct a thorough analysis of your target market and customer segments . This should include:

• Geographic coverage : Urban, rural, or a combination of both.
• Demographic profile : Age, gender, income levels, and occupation.
• Existing financial behavior and needs : Understanding the financial challenges and aspirations of your target customers.

5. Marketing and Outreach Strategy

Outline your marketing and outreach strategies to attract and retain customers. Consider the following:

• Branding and positioning : How you plan to differentiate your microfinance company from competitors.
• Marketing channels : Traditional (e.g., community meetings, door-to-door campaigns) and digital (e.g., social media, mobile apps).
• Partnerships and collaborations : Explore potential partnerships with local organizations, self-help groups, or community leaders.

6. Operations and Management

Describe the operational processes and management structure of your microfinance company, including:

• Loan origination and underwriting : Processes for evaluating loan applications and managing credit risk.
• Loan disbursement and collection : Efficient and cost-effective methods for disbursing loans and collecting repayments.
• Human resources : Recruitment, training, and retention strategies for staff.
• Technology and infrastructure : Systems and tools for managing operations, data, and customer relationships.

7. Financial Projections and Funding Requirements

Provide detailed financial projections for your microfinance company, including:

Additionally, outline your funding requirements and potential sources of capital, such as:

• Equity investments
• Debt financing
• Grants and subsidies
• Crowdfunding platforms

If you want to establish a successful microfinance company in India, it is imperative to include key components in your business plan. Doing so will showcase your comprehensive understanding of the industry, your target market, and the operational and financial aspects of your venture. This will help you secure funding, attract investors or partners, and navigate through the challenges of establishing and growing your business.

Market Analysis and Target Customer Segment

Conducting a thorough market analysis and identifying your target customer segment is crucial for the success of a microfinance company in India. This section of your business plan should provide a comprehensive understanding of the market landscape, potential customer base, and competitive dynamics.

Understanding the Microfinance Market in India

The microfinance industry in India has witnessed significant growth over the past decade, driven by various factors:

• Large Unbanked Population : According to industry estimates, over 60% of India’s population lacks access to formal banking services, creating a significant demand for microfinance products and services.
• Government Initiatives : The Indian government has implemented several initiatives, such as the Pradhan Mantri Jan-Dhan Yojana (PMJDY) and the Micro Units Development and Refinance Agency (MUDRA), to promote financial inclusion and support micro, small, and medium enterprises (MSMEs).
• Rising Urbanization and Migration : Rapid urbanization and rural-to-urban migration have increased the demand for microfinance services in urban and semi-urban areas.
• Growth of Self-Help Groups (SHGs) : SHGs have played a crucial role in facilitating microfinance activities, particularly in rural areas.

Target Customer Segment

To effectively cater to the diverse needs of the Indian population, it is essential to identify and understand your target customer segment. Here are some key factors to consider:

• Geographic Location : Determine whether your microfinance company will focus on rural, urban, or semi-urban areas, or a combination of these. Each region may have distinct socio-economic characteristics and financial needs.
• Demographic Profile : Define your target customer based on age, gender, income level, and occupation. For example, you may focus on women entrepreneurs, small business owners, or low-income households.
• Financial Needs and Behavior : Assess the specific financial requirements of your target customers, such as credit for income-generating activities, consumption smoothing, or emergency funds. Understanding their existing financial behavior and challenges will help you design tailored products and services.
• Level of Financial Literacy : Evaluate the financial literacy levels of your target customers. This will guide you in developing appropriate financial education and training programs to support their financial decision-making abilities.

Competitive Analysis

While the microfinance industry in India offers significant growth opportunities, it is also a competitive landscape. Conduct a thorough analysis of existing players in your target market, including:

• Microfinance Institutions (MFIs) : Identify the major MFIs operating in your target region, their product offerings, pricing strategies, and market share.
• Banks and Non-Banking Financial Companies (NBFCs) : Understand the microfinance products and services offered by traditional banks and NBFCs, as they may pose competition or potential partnership opportunities.
• Self-Help Groups (SHGs) : Assess the presence and influence of SHGs in your target area, as they play a crucial role in facilitating microfinance activities, particularly in rural regions.
• Fintech Companies : Evaluate the emergence of fintech companies offering digital microfinance solutions, as they may disrupt traditional models or present collaboration opportunities.

To effectively serve the underserved population in India, it is essential to conduct a thorough market analysis and identify your target customer segment. This will help you develop a customized business strategy, design appropriate products and services, and position your microfinance company to meet the specific needs of your target market.

Operations and Service Delivery Model

Establishing an efficient and scalable operations and service delivery model is crucial for the success of a microfinance company in India. This section of your business plan should outline the processes and strategies for effectively delivering financial services to your target customers.

Loan Origination and Underwriting

The loan origination and underwriting process is the backbone of a microfinance company’s operations. It involves the following key steps:

• Client Acquisition and Outreach : Identify potential customers through various channels, such as field officers, community meetings, referrals, or digital platforms.
• Application and Documentation : Collect and verify necessary information and documents from applicants, including proof of identity, income, and business details (if applicable).
• Credit Assessment and Risk Evaluation : Develop a robust credit assessment framework to evaluate borrowers’ creditworthiness, repayment capacity, and risk profiles. This may involve analyzing cash flows, collateral, and credit history (if available).
• Loan Approval and Disbursement : Once the loan application is approved, disburse the funds to the borrower through secure and convenient channels, such as bank transfers, mobile money, or cash disbursements.

Loan Repayment and Collection

Effective loan repayment and collection processes are essential for maintaining a healthy portfolio and ensuring sustainability. Consider the following strategies:

• Repayment Schedules : Design repayment schedules that align with your borrowers’ cash flows and income patterns, such as weekly, bi-weekly, or monthly installments.
• Collection Methods : Implement a combination of collection methods, including field visits, mobile money platforms, or partnerships with local agents or self-help groups.
• Delinquency Management : Establish clear policies and procedures for managing delinquent loans, including restructuring options, counseling, and legal recourse (if necessary).
• Portfolio Monitoring : Regularly monitor your loan portfolio to identify potential risks, delinquency trends, and areas for improvement.

Customer Service and Relationship Management

Providing exceptional customer service and building strong relationships with your borrowers is crucial for customer retention and growth. Consider the following practices:

• Customer Onboarding and Education : Develop comprehensive onboarding processes to educate borrowers about your products, terms, and conditions, as well as financial literacy training.
• Grievance Redressal : Implement a robust grievance redressal mechanism to address customer complaints and concerns promptly and effectively.
• Customer Feedback and Engagement : Regularly gather customer feedback through surveys, focus groups, or community meetings to understand their evolving needs and improve your services.
• Customer Relationship Management (CRM) System : Implement a CRM system to maintain detailed customer profiles, track interactions, and personalize communication and support.

Technology and Infrastructure

Leveraging technology and establishing a robust infrastructure can significantly enhance the efficiency and scalability of your operations. Consider the following aspects:

• Core Banking System : Implement a core banking system or loan management software to streamline loan origination, disbursement, and repayment processes.
• Mobile and Digital Platforms : Develop mobile applications or leverage digital platforms to enable convenient access to financial services, loan applications, and repayments.
• Data Management and Analytics : Establish secure data management systems and leverage data analytics to gain insights into customer behavior, portfolio performance, and operational efficiencies.
• Branch and Field Infrastructure : Determine the optimal mix of physical branches and field operations based on your target market’s needs and accessibility requirements.

Developing a well-structured operations and service delivery model can ensure efficient and scalable processes, exceptional customer service, and a healthy loan portfolio, ultimately contributing to the long-term success of your microfinance company in India.

Financial Projections and Funding Requirements

Developing comprehensive financial projections and assessing funding requirements are essential components of a microfinance business plan. This section should provide a detailed analysis of the company’s expected financial performance, resource needs, and potential funding sources.

Financial Projections

Financial projections are crucial for evaluating the viability and potential profitability of your microfinance company. These projections should include the following key statements:

1. Income Statement

The income statement projects your company’s expected revenue, expenses, and profitability over a specific period, typically three to five years. Key components include:

• Revenue Streams : Interest income from loan portfolios, fees, and other income sources.
• Operating Expenses : Personnel costs, administrative expenses, marketing, and loan loss provisions.
• Profitability Metrics : Net income, return on assets (ROA), and return on equity (ROE).

2. Balance Sheet

The balance sheet provides a snapshot of your company’s financial position, including assets, liabilities, and equity. Key components include:

• Assets : Cash and cash equivalents, loan portfolio, fixed assets, and other assets.
• Liabilities : Debt obligations, borrowings, and other liabilities.
• Equity : Contributed capital, retained earnings, and reserves.

3. Cash Flow Statement

The cash flow statement tracks the inflows and outflows of cash from operating, investing, and financing activities. This statement is crucial for assessing your company’s liquidity and ability to meet its financial obligations.

4. Key Assumptions and Sensitivity Analysis

Your financial projections should be based on well-researched assumptions, such as:

• Loan Portfolio Growth : Projected growth in loan disbursements and outstanding portfolio.
• Interest Rates : Expected interest rates for loan products and funding sources.
• Operational Efficiency : Anticipated improvements in operational efficiency and cost control measures.
• Loan Loss Rates : Estimated loan loss rates based on historical data and industry benchmarks.

Additionally, conduct a sensitivity analysis to assess the impact of changes in key assumptions on your financial performance.

Funding Requirements and Sources

Operating a microfinance company requires significant financial resources, particularly for loan portfolio growth and expansion. In this section, outline your funding requirements and potential sources:

• Equity Financing : Identify potential equity investors, such as impact investors, development finance institutions, or venture capitalists, and outline the equity funding requirements.
• Debt Financing : Assess the need for debt financing from banks, non-banking financial institutions, or specialized microfinance lenders. Determine the appropriate mix of short-term and long-term borrowings.
• Grants and Subsidies : Explore opportunities for grants, subsidies, or concessional funding from government agencies, development organizations, or foundations to support your operations or specific initiatives.
• Securitization and Capital Markets : Evaluate the potential for securitizing your loan portfolio or accessing capital markets through bond issuances or other structured finance instruments.
• Internal Accruals : Reinvest a portion of your company’s retained earnings to support growth and expansion plans.

Provide a clear breakdown of your funding requirements, sources, and associated costs, including interest rates, fees, and repayment schedules.

By providing detailed financial projections and a clear funding strategy, you can demonstrate the financial sustainability and potential for growth of your microfinance company, increasing your chances of securing capital and support from investors, lenders, and other stakeholders.

Risk Management and Regulatory Compliance

Operating a microfinance company in India involves navigating various risks and adhering to regulatory requirements. Effective risk management and compliance strategies are crucial for ensuring the long-term sustainability and credibility of your business. This section of your business plan should address the following key areas:

Risk Management

Microfinance companies face a range of risks that can impact their operations, profitability, and reputation. Implementing a robust risk management framework is essential to identify, assess, and mitigate these risks.

1. Credit Risk

Credit risk is the potential risk of borrowers defaulting on their loan obligations. To manage credit risk, consider the following strategies:

• Robust Credit Assessment : Implement rigorous credit assessment processes, including credit scoring models, cash flow analysis, and collateral evaluation (if applicable).
• Portfolio Diversification : Diversify your loan portfolio across different sectors, regions, and borrower profiles to minimize concentration risk.
• Loan Loss Provisioning : Maintain adequate loan loss provisions based on industry benchmarks and your portfolio’s risk profile.

2. Operational Risk

Operational risks arise from inadequate or failed internal processes, systems, or human errors. Mitigate these risks through:

• Process Standardization : Develop and implement standardized processes for loan origination, disbursement, collection, and customer service.
• Employee Training : Invest in comprehensive training programs for your staff to ensure adherence to policies and procedures.
• Internal Controls : Implement robust internal controls, including segregation of duties, regular audits, and monitoring mechanisms.

3. Liquidity Risk

Liquidity risk refers to the potential inability to meet financial obligations as they become due. Manage liquidity risk through:

• Cash Flow Forecasting : Develop accurate cash flow forecasting models to anticipate funding requirements and ensure adequate liquidity.
• Diversified Funding Sources : Maintain a diversified mix of funding sources, including equity, debt, and internal accruals, to mitigate reliance on a single source.
• Contingency Plans : Establish contingency plans, such as access to emergency credit lines or liquid asset reserves, to address unexpected liquidity shortfalls.

4. Reputational Risk

Reputational risk can arise from negative publicity, customer complaints, or unethical business practices. Protect your company’s reputation by:

• Ethical Practices : Promote ethical lending practices, transparency, and fair treatment of customers.
• Customer Grievance Redressal : Implement effective customer grievance redressal mechanisms to address complaints promptly and professionally.
• Community Engagement : Engage with local communities, self-help groups, and stakeholders to build trust and credibility.

Regulatory Compliance

Microfinance companies in India are subject to various regulatory requirements imposed by the Reserve Bank of India (RBI) and other relevant authorities. Ensure compliance with the following key regulations:

• Non-Banking Financial Company (NBFC) Regulations : If operating as an NBFC, comply with capital adequacy norms, asset classification, and provisioning requirements set by the RBI.
• Interest Rate Caps : Adhere to the interest rate caps and pricing guidelines established by the RBI or relevant state-level regulations.
• Customer Protection Norms : Implement robust customer protection measures, including fair lending practices, transparent communication, and responsible debt collection practices.
• Anti-Money Laundering (AML) and Know Your Customer (KYC) : Establish AML and KYC policies and procedures to comply with relevant regulations and prevent financial crimes.
• Data Protection and Privacy : Ensure compliance with data protection and privacy laws, safeguarding customer information and maintaining appropriate data security measures.

To ensure your microfinance company operates within industry standards, it’s important to manage risks and comply with regulations. By doing so, you can build trust with stakeholders and maintain ethical practices. This involves implementing strategies to prevent potential risks and ensuring that all regulatory requirements are met. By following these guidelines, your company can operate safely and gain the confidence of your stakeholders.

Key Takeaways

• Comprehensive Business Plan : A well-crafted business plan is essential for the success of a microfinance company in India, serving as a roadmap for operations, strategy, and growth.
• Market Analysis and Target Segment : Conduct a thorough analysis of the microfinance market landscape and identify your target customer segment based on factors such as geographic location, demographic profile, financial needs, and behavior.
• Operational Excellence : Establish efficient and scalable processes for loan origination, underwriting, disbursement, and collection, leveraging technology and robust infrastructure.
• Customer-Centric Approach : Prioritize exceptional customer service, financial education, and strong relationships with borrowers to drive customer retention and growth.
• Financial Projections and Funding Strategy : Develop comprehensive financial projections, including income statements, balance sheets, and cash flow statements, and identify potential funding sources, such as equity, debt, grants, and internal accruals.
• Risk Management Framework : Implement a robust risk management framework to address credit, operational, liquidity, and reputational risks, ensuring long-term sustainability.
• Regulatory Compliance : Adhere to relevant regulations imposed by the Reserve Bank of India and other authorities, including NBFC regulations, interest rate caps, customer protection norms, and anti-money laundering measures.
• Ethical and Responsible Practices : Promote ethical lending practices, transparency, fair treatment of customers, and engagement with local communities to build trust and credibility.
• Continuous Improvement : Regularly monitor and adapt your strategies based on customer feedback, market trends, and operational performance, fostering a culture of continuous improvement.

By incorporating these key takeaways into your microfinance business plan, you can create a solid foundation for a successful and sustainable venture that contributes to financial inclusion and economic empowerment in India.

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How to Start a Microfinance Business in India?

by Shreya shrestha | Feb 22, 2021

In the midst of the COVID-19 pandemic, when almost every industry across India was witnessing a sharp downturn in its growth trajectory, the Indian microfinance industry developed a significant amount of resilience and was able to not only sustain itself but also register a massive growth of 31% in FY20, by jumping its loan portfolio to ₹2.36 lakh crores.

While this number might appear to be astounding at first glance, in reality, the Indian microfinance industry has been steadily growing over the past decade, and a recent research by Dr Swati Sharma of Amity Business School, Rajasthan, highlighted this fact.

Along with this, a quick look at the recent Statista report outlines the consistent growth the Indian microfinance industry has witnessed over the period of FY12-FY16, and all these reports go on to establish the fact, that not only is microfinance being widely accepted by the Indian populace but also demand for their services is constantly on the rise, making the proposition of starting a microfinance business in India even more attractive.

But, how can you start a microfinance business in India?

That is exactly what we will be talking about in today’s blog post, so without further ado, let’s get started.

Table of Contents

What Is a Microfinance Institution?

• Forming a Microfinance Company in India

Registering a Microfinance Business as an NBFC

Registering a microfinance business under section 8, in conclusion.

Before we learn how you can start a microfinance business in India, one of the most important aspects we need to invest our attention to is understanding the meaning of a microfinance company.

As per the RBI (Reserve Bank of India), microfinance or microfinance institutions can be defined as being financial institutions, which extend financial instruments such as small-ticket loans to the underbanked, low-income and weaker sections of the economy.

Primarily developed with the intention of increasing financial inclusion by providing the weaker sections of the economy an affordable and easily accessible tool to rise out of poverty, microfinance in today’s India provides its benefactors with a number of advantages such as:

• Providing easy and affordable access to credit instruments to the weaker sections of the society by leveraging group lending and thus fostering a joint liability mechanism among the benefactors such that on-time repayment can be seamlessly achieved.
• Providing easy and trustworthy access to traditional financial instruments such as saving bank accounts, such that financial inclusion can be raised among the poor.
• Ousting the use and increasing reliance of the poor on moneylenders and informal credit instruments, which are infamous for charging exorbitant rates of interest, and instead providing them access to affordable credit without the requirement of guarantors and assets or collaterals.

Starting a Microfinance Business in India

Now that you understand the meaning of a microfinance institution and the advantages it extends to its benefactors let us understand how you can start a microfinance business in India.

In India, there are two main ways of starting a microfinance business.

• Start an NBFC (non-banking financial institution), which is duly registered with the RBI.
• Register your microfinance business as a Section 8 company under the Section 8 of the Indian Companies Act, 2013.

In either of the pathways you follow to start a microfinance business, there are a number of government outlined prerequisites you will need to follow. Some of the most significant of them are as shared below.

Now that you are aware of the prerequisites you need to fulfil in order to start a microfinance business in India, shared below is a rundown of the steps you need to follow in order to register it as an NBFC with the RBI.

• Register Your Company

In order to register your microfinance business as an NBFC, you will first need to form a private or a public limited company. In order to register as a private limited company, you will need to have at least two members present and a paid-up capital of ₹1 lakh, while on the other hand, if you want to start a public limited company, you will need to have at least 7 members and a minimum paid-up capital of ₹5 lakhs.

2. Raise Capital

Once you have registered your microfinance business as an NBFC, the next step of the process is to raise your capital. In the case of a microfinance business registered within India, you will need to raise a capital of ₹5 crores; however, if your company is registered within the northeastern territories of India, you will need to raise a capital of only ₹2 crores.

3. Deposit Your Capital

Once you have secured the capital amount of either ₹5 crores or ₹2 crores as applicable in your case, you will need to deposit the same with an SCB (Scheduled Commercial Bank) in the form of an FD (Fixed Deposit) and acquire a “No Lien” certificate against the same.

4. Submit Your Application

Once you have secured a “No Lien” certificate against your FD, the next step of the process is to submit your application along with your documents to the RBI. At the initial stage, you will need to fill out an online application on the RBI’s website, and post that; you will need to submit a hard copy of your application along with your newly issued licence and other certified documents with the local branch of the RBI.

Some of the most significant documents you will need in order to proceed with your application are as follows.

• Articles of Association and Memorandum of Association from your company registration.
• Incorporation certificate of your company
• A copy of your board resolution document
• A certified copy of your Fixed Deposit receipt from your auditor
• A banker’s certificate stating the net deposited fund along with the “No Lien” certificate
• Banker’s report of your company along with recent credit reports of all your directors
• Net-worth certificates of all your directors duly verified by your auditor along with the educational and professional qualifications of your directors.
• KYC and income proof of your directors
• Proof of past working experience in the financial sector, and
• Structural plan for your microfinance business

Submit all these documents with the duly registered authorities, and post additional clarifications, you will have your microfinance license from the RBI in a matter of few days.

Another pathway to register your microfinance business in India is by registering it under the Section 8 of the Indian Companies Act, 2013. In order to achieve the same, you will need to follow the below-outlined steps.

• Apply for DSC and DIN

The first step in order to register your microfinance business under Section 8 of the Indian Companies Act, 2013 is to apply for a DSC (Digital Signature Certificate) followed by a DIN (Director Identification Number). The idea behind this simply being, both these documents are crucial for approving all the e-forms you will be completing in the upcoming steps.

2. Company Name Approval

As the director of your microfinance business, once you have secured your DIN and DSC, the next step of the process is to seek name approval for your business by filling out the INC-1 form. As per the mandates prescribed by the Section 8 of the Companies Act, 2013, in order to register a microfinance business under this section, your company must contain a combination of the words, “Sanstha”, “Foundation”, or “Micro-Credit.”

3. File for Your MOA and AOA

Once you have secured the approval for your company name, the next step of the process is to file for your MOA (Memorandum of Association) and AOA (Article of Association), along with all the necessary documentation.

4. Apply for Your License

Once you have secured your MOA and AOA, the final step of the process is to submit all your documents to the RBI, along with your incorporation certificate and INC-12 form to obtain a license. Some of the most significant documents you will need to submit in order to secure a license for your microfinance business are as follows.

• Documents for identity proof of all directors as well as promoters.
• Documents for address proof of all directors as well as promoters.
• Photographs of all directors as well as promoters.
• Documents for proving ownership of registered office or rental document.
• NOC from the property owners
• Stamp duty as prescribed by the state
• Any other document which might be prescribed by the state government.

As is evident from the above explanation, it is much easier to register your microfinance business under Section 8 of the Companies Act, 2013, as compared to registering it as an NBFC.

As the demand for microfinance institutions continues to steadily increase among the Indian populace, in my opinion, starting a microfinance institution is the need of the hour. Now that you know how to get started with the registration process, go ahead and register your very own microfinance business in India today.

All the best.

The Reference Shelf

• Microfinance Company Registration [ Link ]
• Growth of Micro Finance in India: A Descriptive Study [ Link ]
• Chapter 1: Introduction [ Link ]
• Microfinance industry sees 31% rise in loan portfolio at Rs 2.36 lakh crore in FY20: Report [ Link ]
• All About MicroFinance Company Registration– The cheapest way to start the Micro Finance Company in India [ Link ]
• Gross loan portfolio volume of the microfinance industry in India from FY 2012 to FY 2016 [ Link ]
• How to Register a Micro Finance Company in India – A MFI – NBFC in India [ Link ]

How to Start Micro Finance Company | 9 Easy Steps

Microfinance companies play a crucial role in providing financial services to the underprivileged and economically weaker sections of society . If you are interested in how to start micro finance company , this guide will walk you through the process step-by-step.

Step 1: Conduct Market Research

The first step in starting a microfinance company is to conduct market research.

Some things to consider during your research are:

• Identify your target market: Who are your potential clients? What are their needs and preferences?
• Analyze the competition: Who are your competitors in the market? What sets your microfinance company apart from theirs?
• Analyze the demand: Is there a need for microfinance services in the area you are targeting? Are there potential clients who may be interested in your services?
• Potential customer base: Determine how many potential customers you can realistically reach with your marketing efforts.

Tip:  Talk to potential customers and other players in the market to get a better understanding of the industry and its potential opportunities and challenges.

For this purpose, you can use  Quora .

Step 2: Develop a Business Plan

Once you have conducted market research, you need to develop a business plan.

The business plan should include the following:

• Company Overview: Describe the mission, vision, and values of your microfinance company.
• Market Analysis: Provide a detailed analysis of the market, including the target customers, competition, and demand for microfinance services.
• Financial Plan: Outline the financial projections for your company, including the sources of funding, revenue streams, and expenses.
• Marketing Strategy: Describe your marketing strategy, including how you plan to reach out to potential customers and promote your services.

Tip:  Your business plan should be a dynamic document that you can update as your business grows and changes.

Step 3: Obtain Company Registration Online

The next step is to obtain  company registration online . 

To start a microfinance company, you can choose to register your company as a non-banking financial company (NBFC) or a section 8 company .

Follow these steps To register your company as an  NBFC :

• Apply for the certificate of registration with the Reserve Bank of India (RBI) on their website.
• Submit the application along with the required documents and pay the registration fee.
• Once your application is approved, you will receive the certificate of registration.

To register your company as a  Section 8 Company , you need to follow these steps:

• Apply for the company registration online with the Ministry of Corporate Affairs (MCA) on their website.
• Once your application is approved, you will receive the certificate of incorporation.

Tip:  Seek professional help by filling out the form on your right if you have any difficulties during the registration process.

Step 4: Obtain Licenses and Permits

To start micro finance company, you need to obtain the necessary licenses and permits. 

Some of the licenses and permits required include:

• RBI License:  As an NBFC, you need to obtain a license from the RBI to operate as a microfinance company.
• GST Registration:  You need to register for GST if your company's turnover exceeds the threshold limit.
• PAN and TAN:  You need to obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the  Income Tax Department .
• Trade License:  You need to obtain a trade license from the local municipal corporation.
• Other Licenses and Permits:  Depending on the location and nature of your business, you may need to obtain other licenses and permits from the relevant authorities.

Tip:  Make sure you have all the necessary licenses and permits before starting your microfinance company to avoid any legal issues.

"It's better to be safe than sorry."

Step 5: Set Up Your Office and Infrastructure

Finding the perfect location to start micro finance company can be a challenge.

But, it is crucial to ensure accessibility for both staff and customers.

Consider factors such as  safety, transportation, and accessibility when selecting your office space .

Moreover, hiring staff with a passion for microfinance and a deep understanding of the local community can be beneficial to your company's success.

Also, investing in technology such as loan management software and accounting software can help streamline your operations and increase efficiency .

Tip:  Create a comfortable and welcoming environment for your customers. It can include providing comfortable seating and refreshments and creating a welcoming atmosphere. 

Additionally, make sure your office is easily accessible and visible to potential customers. 

Use signage and advertising to attract attention and let people know about your services.

Step 6: Develop Your Product and Service Offerings

Developing your product and service offerings is a critical step in starting a microfinance company. 

Here are some tips to help you get started:

• Identify your target market:

Determine the specific demographic you want to serve, such as women entrepreneurs or small business owners.

• Develop your product offerings:

Once you have identified your target market, develop microfinance products that meet their unique needs.

Consider offering a range of products, including loans, savings accounts, and insurance.

• Set interest rates and repayment terms:

Determine competitive interest rates and repayment terms that will attract borrowers while also ensuring that your company remains profitable.

• Streamline the loan application and approval process:

Develop an efficient loan application and approval process to ensure that borrowers can access funds quickly and easily.

• Provide financial education:

Offer financial education and training to your borrowers to help them understand the importance of responsible borrowing and financial management.

• Use technology to streamline operations:

Utilize loan management software and other technologies to help automate processes and improve efficiency.

• Stay competitive:

Keep an eye on the market and stay competitive by regularly reviewing your product offerings, interest rates, and loan terms.

By following these tips, you can develop a product and service offering that meets the needs of your target market and helps your microfinance company succeed.

Step 7: Build Your Customer Base

Building a solid customer base is crucial for the success of your microfinance company. 

Here are some tips to help you build a strong customer base:

• Advertise Effectively:  

Invest in targeted advertising to reach potential customers.

You can use online platforms such as social media, Google Ads, and email marketing to promote your services.

Also, consider offline advertising methods such as billboards and print ads in local newspapers.

• Word-of-Mouth Referrals: 

Encourage your satisfied customers to refer their friends and family to your microfinance company.

Word-of-mouth referrals can be a powerful marketing tool and can help increase your customer base quickly.

• Establish Partnerships:  

Partner with local organizations and institutions such as non-profit organizations, schools, and community groups to increase awareness about your services.

This can also help build trust and credibility with potential customers.

• Offer Incentives:  

Consider offering incentives such as referral bonuses or discounts to attract new customers and retain existing ones.

• Build Relationships: 

Develop a personal relationship with your customers to build trust and loyalty.

It can help increase customer satisfaction and encourage repeat business.

Remember, building a strong customer base takes time and effort.

Be patient, and continue to improve your services to attract and retain customers.

Step 8: Monitor and Evaluate Your Performance

Once your microfinance company is up and running, it is important to monitor and evaluate your performance regularly. 

This will help you identify areas of improvement and make necessary adjustments to your operations.

Some key performance indicators to monitor include:

• Loan Portfolio Quality:  Monitor the quality of your loan portfolio, including the level of non-performing loans.
• Profitability:  Monitor your revenue and expenses to ensure that your company is profitable.
• Customer Satisfaction:  Monitor customer feedback to ensure that you are meeting their needs and expectations.
• Regulatory Compliance:  Monitor your compliance with regulatory requirements and make necessary adjustments to ensure that you are in compliance at all times.

Step 9: Expand Your Operations

Congratulations on establishing your microfinance company! 

You're now on your way to making a positive impact on the lives of people who need financial assistance. 

But don't stop there - once you've established a solid foundation for your company, it's time to think about expansion.

Expanding your operations may seem daunting, but it's a necessary step if you want to increase your impact and reach more people. 

Here are some exciting possibilities for your microfinance company:

• Explore new markets: 

If you're currently operating in one region or locality, consider expanding to other areas.

You could explore neighbouring regions, cities, or even other countries to reach a wider audience.

• Offer new products and services: 

If you're only offering one type of microfinance product, consider adding more options to cater to different needs.

For example, you could offer small business loans, education loans, or emergency loans .

• Partner with other organizations:  

Consider partnering with other organizations that share your mission and values.

This could include NGOs, government agencies, or other microfinance institutions .

Partnering can help you expand your reach and impact and pool resources to create even more impactful programs.

Remember that expanding your microfinance company requires careful planning and execution. 

Make sure you conduct thorough research, develop a detailed business plan, and identify funding sources before taking the plunge. 

Once you've expanded, make sure you monitor and evaluate your performance regularly to ensure continued success. Good luck!

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A Complete Checklist for Start a Small Finance Company in India

Shivi Gupta | Updated: Jun 03, 2020 | Category: Microfinance Company , NBFC

India is a rapidly developing economy, with a diverse population and a large bank of talent. However, a significant portion of the country’s population resides in rural and semi-urban areas, where the traditional banking services are yet to make a mark. Individuals and businesses belonging to the lower-income group are unable to find secure channels of credit. Due to this shortage, they are forced to rely on informal financial sources that overcharge them significantly. The introduction of Non-Banking Financial Companies (NBFC) has reduced this gap to a large extend, and the introduction of small finance companies has further allowed lower-income groups to access quality credit for their requirements. This guide lays down the complete checklist on how to start a small finance company in India .

Table of Contents

What is a Small Finance Company in India?

A small finance company or a microfinance institution is a private institution that extends financial services to businesses and individuals belonging to the lower income levels. Small finance companies provide credit services to individuals and businesses that form the lower levels of the income hierarchy.

Many individuals and business are unable to match the requirements of traditional banking institutions that require a credit background and substantial disposable income. Micro or small finance companies provide financial resources to their customers for their personal or professional financial necessities. Individuals, self-employed professionals and businesses can fulfil their entrepreneurial dream or fulfil a personal financial emergency by availing small-size loan from a microfinance company .

Lending Limitations of Small Finance Company in India

Under the RBI Notifications, small finance companies in India are allowed to provide loans of up to INR 50,000 in rural regions and INR 1,25,000 in urban regions to entrepreneurs, businesses, and individuals/households that belong to the low-income group. It provides loans to small businesses, venturers, self-employed professionals, farmers, etc. without any form of collateral security or marginal money. It can extend credit at reasonable rates as laid down by the central government and Reserve Bank of India.

Benefits of Small/Micro Finance Company in India

The benefits of small or microfinance businesses in India can be summed up under the following points:

• A small finance company provides low-income individuals and MSMEs with quality credit assistance.
• A microfinance company promotes entrepreneurial drive and self-financial reliance among individuals.
• Small finance companies in India have more lenient credit appraisal standards and do not need an elaborate credit history of the borrower.
• Such financial institutions offer flexible and affordable loan repayment rates as compared to traditional banking institutions.
• By offering financial assistance to the lower-income groups, these companies promote better living standards and overall economic growth in the country.

Options for Start A Small Finance Company in India

There are two ways to start a small finance company in India:

• Micro Finance Institution (MFI) Non-Banking Finance Company (NBFC) registered with RBI.
• Small finance Company registered under Section 8 of the Companies Act, 2013.

Starting a Small Finance Company as Non-Banking Financial Company- Micro Finance Institution (NBFC-MFI)

Micro Finance Institutions or MFIs are small finance companies that provide financial services similar to the lending services provided by NBFCs in India. MFIs primarily target the weaker and marginalized segments which are unable to access banking services due to the strict eligibility requirements or inaccessibly in their remote regions.

Generally, an MFI or small finance company extends small-sized loans to individuals and businesses of around INR 20,000-30,000 for an array of financial requirements.

An NBFC MFI is a non-deposit taking NBFC. It is mandatory for such a company to have at least 85% of its assets as qualifying assets. The conditionals applicable over a small finance company established as an NBFC-MFI are as follows:

• Loans provided by an NBFC-MFI can be provided to households with an annual income of INR 1 lakh in rural regions, and to households with an annual income of INR 1,60,000 in urban and semi-urban regions.
• Loans provided by an NBFC-MFI are limited to INR 50,000 in the first cycle and INR 1,00,000 in the following cycles.
• The loans can be extended for a minimum period of 24 hours in case of the amount of loans is more than INR 15,000. Additionally, the borrowers have the option of prepayment without penalty in such cases.
• Loans provided by a small finance company are provided without any form of collateral.
• The loan repayment cycle can be weekly, 15-day or monthly. The borrower has the option to select the EMI cycle as per their repaying capacity.
• The processing fee is limited to 1% of the gross loan amount.
• The company is allowed to different rates of interest from its customers as per their portfolio; however, the minimum and maximum rates of interest cannot exceed 4% for individual loans.
• The NBFC-MFI requires a CIBIL membership mandatorily.

Procedure to Start a Small Finance Company as NBFC-MFI

The following process is followed to start an NBFC-MFI in India:

• Business Registration: The first step to start a small finance company as NBFC-MFI is to register the business as a company under the Companies Act 2013. Once the company registration formalities are completed and the business receives its Certificate of Incorporation from the State ROC, it is required to hold a minimum amount of capital as specified by the RBI.
• Capital Requirement: To start a microfinance company in India, a minimum capital of INR 5 crores is required. However, the requirement to start a small finance company in North-Eastern states is INR 2 crores. The business is required to open a bank account and deposit the capital in the form of a fixed deposit.
• RBI Application: The next step is to file an application with the Reserve Bank of India in the given format for NBFC-MFI registration , along with the requisite documents. The RBI allows a Company Application Reference Number, after which a physical (hard) copy of the documents is submitted.

The RBI performs detailed due diligence on the documents submitted by the applicant company such as the incorporation certificate, Banker’s certificate, MOA and AOA , fixed deposit receipt, etc.

Once the applicant clears the checklist of the RBI, the bank issues a Certificate of Incorporation. After receiving the RBI’s incorporation certificate, the company can launch its lending services in India.

Documents Required for Small Finance Company Registration as NBFC-MFI

The following documentation is required to file an application to start a small finance company in the form of NBFC-MFI in India:

• Certified copy of Certificate of incorporation and certificate of commencement of the business.
• Certified copy of the latest Memorandum of Association and Article of Association of the company.
• Certified copy of the Board Resolution allowing the registration of the company as a small/microfinance company.
• Declaration laying down that the company would comply with the rules, regulation and notifications provided by Reserve Bank of India for non-banking financial companies in India.
• Bankers’ report mentioning their dealing with the company.
• Auditor’s report specifying that the applicant fulfils the minimum capital requirements.
• A detailed 5-year business plan that lays down the company’s operational strategies and financial projections.
• Certified copies of educational and professional qualification of all directors and experience certificate in the sector of Financial Services if any.

Starting a Small Finance Company as Non-Profit Micro Finance Business

Another option to start a small finance company in India is by way of establishing a Non-Profit microfinance business or a Section 8 company. As per the RBI regulations, financial activities by a private institution can only be carried by a company registered as a Non-Banking Finance Companies (NBFC).

However, the Reserve Bank of India has granted certain exemptions for businesses to extend financial services up to a limit without getting registered as an NBFC. The RBI issued its master circular: RBI/2015-16/15 DNBR (PD) CC.No.052/03.10.119/2015-16 dated July 01, 2015 allows companies registered under Section 8 of the Companies Act to undertake microfinance activities.

The circular further states that under Para 2 (iii) of the circular, Sections 45-IA, 45-IB, and 45-IC of the Reserve Bank of India Act, 1934 are not applicable over any non-banking financial company which is involved in the following activities:

• Company engaged in microfinance activities, extending credit for up to INR 50,000 to a business enterprise.
• Company engaged in microfinance activities extending credit for up to INR 1,25,000 to fulfil the costs of a housing unit to any poor person and allowing such individuals to elevate their level of income and standard of living.
• A Company registered under Section 8 of the Companies Act, 2013 (section 25 of the Companies Act, 1956).
• A company which is not taking any public deposits as described in paragraph 2(1) (xii) of Notification No. 118 /DG (SPT)-98 dated January 31, 1998.

Under this notification of the Reserve Bank of India, a microfinance company can be started in the form of a trust, society or company. An MFI can, therefore, be registered under any of the following acts to run as a non-profit business:

• As a Trust under the Indian Trust Acts, 1882
• As a Society under the Societies Registration Act, 1860
• As a Section 8 Company under the Companies Act, 2013

Key Features of Section 8 Small/Micro Finance Company

A small finance company registered as a Section 8 company has the following unique features:

• A section 8 Company can be established only for the purposes of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other charitable goals.
• Any forms of profits earned by a Section 8 company can only be used to fulfil its charitable objectives.
• A company registered under Section 8 of the Companies Act cannot declare or pay any form of dividend to its members.
• The small finance company can grant a maximum loan amount up to INR 50,000 for business purposes and INR 1,25,000 for residential dwelling.

Benefits of Small Finance Company Registered Under Section 8

Registering a small finance company under section 8 of the Companies Act, 2013 comes with the following benefits:

• A Section 8 company does not require any separate approvals or registrations from the RBI.
• A Section 8 company does not need to maintain a minimum capital deposit of INR 5 crores.
• The process to start a Section 8 company is fairly simple as compared to an NBFC-MFI.
• The cost of Section 8 company registration is lower than the cost of registering an NBFC .
• The post-registration compliances of a Section 8 company are fewer than a small finance company registered as an NBFC-MFI .

Procedure for Start a Section 8 Small Finance Company in India

The registration process to start a small finance company in the form of a Section 8 company is fairly simple. It includes the following easy steps to start a Section 8 small finance business in India:

• Minimum Requirements: There must be at least two individuals to register a Section 8 company.
• DSC and DIN: Each Director of the company must have a Digital Signature Certificate (DSC) and Directors Identification Number (DIN) for application filing and compliance requirements.
• Naming the Section 8 Company: The application to get the name approval of the company must be filed, mentioning a unique name for the company. The name of Section 8 small finance company must include the words such as foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust or Micro Credit. This makes the nature of the business transparent for the general public.
• Central Government License:  Once the name approval is received, the company must obtain the license to operate as a Section 8 company. The license is obtained by submitting the details of the company’s detailed documentation.
• Company Incorporation: Once the documents are submitted and the government approval is received, the company incorporation application must be filed. Upon approval of the documents and application, the company incorporation certificate is issued.
• PAN and TAN:  The PAN and TAN of the company must be obtained once the company incorporation is done.

Documents Required for Section 8 Small Finance Company Registration

The following documents are required to obtain the Section 8 company registration in India:

• Latest passport size photographs of all directors or promoters.
• Copy of PAN of all directors or promoters.
• Identity Proof of the Directors such as voter ID card, driving license, passport or Aadhar Card.
• Address Proof of the Directors such as the Bank Statement or the latest Utility Bills such as telephone bill, landline bill or electricity bill.
• Property ownership documents of Registered office such as rent agreement or lease deed, property documents, or electricity bills, etc.
• Certificate by a practising Chartered Account or Company Secretary.

Starting a Small Company: Which Option is Better?

While starting and running a small finance company as a Section 8 company is relatively easier, it is advised by the most experienced finance experts that starting a small finance company in the form of an NBFC-MFI. Starting an NBFC-MFI provides the RBI’s [1] backing to the business to carry out its lending activities securely in the country.

Also, with the RBI’s backing, the chances of default are lesser than the defaults in the case of Section 8 companies. Since registering an NBFC-MFI requires a Banker’s involvement in the Board, the lending activities are executed and backed by subject matter experts. Starting a small finance company in the form of NBFC-MFI if the business has the correct support and guidance of business experts who have prior experience in NBFC registrations at the RBI. Swarit connects you with a team of NBFC experts who can guide you at each step of your business registration and help you establish and operate a successful small finance company in India.

Also, Read: Incorporation of Innovation in the Non-Banking Financial Companies .

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Ways to Set up a Microfinance Company

Be it an NBFC or a Section 8 company, this article tells you what you need in order to, and how to, set up a microfinance company in India.

Are you looking for how to start a microfinance company? Great decision indeed! Now, there are 2 ways in which you can set up a microfinance company. Before you pick one, read this blog to understand the difference between these two types and the process of setting them up.

This way you get clarity and can set up your company successfully. We also share with you the easiest way to set up a microfinance business in the end. 

Table of Contents

The 2 Ways to Set Up a Microfinance Company:

• As an NBFC (Non-Banking Finance Company), registered with the RBI
• As a Section 8 company (formed as per the provisions of Section 8 of the Companies Act, 2013).

Prerequisites for the Registration of a Microfinance Company

You must meet certain prerequisites before starting with the microfinance company registration process.

1. For Registering as an NBFC

• It is mandatory to have RBI approval
• You should have a minimum net owned fund of ₹5 crores
• One of the directors must have over 10 years of experience in the service industry
• You must have maximum a loan limit of 10% of the total assets
• Further, you must follow the due process of forming a company
• You must have a minimum of 7 members to register as a public limited company.  2 members will be enough for a private limited company.  

2. For Section 8 Microfinance Company Registration

• RBI approval is not mandatory
• There is no minimum requirement of net owned funds
• No need of any prior experience for the directors
• You can disburse unsecured loans up to ₹50,000 to small businesses. Also, loans up to ₹1.25 lakh can be disbursed to dwelling residence
• You must have a minimum of 2 members for Section 8 microfinance company registration

You need to analyse these requirements and see which type of company is better for you. An NBFC takes a lot of investment and approvals to set up but it provides more flexibility in the loans you can provide and to whom.

On the other hand, a Section 8 company is much easier to set up. However, there are limitations on how much you can lend.

Microfinance Company Registration Process

The process varies depending on whether you want to register as an NBFC or as a Section 8 company. We will discuss the steps involved in both these models.

1.  Process for NBFC Registration

Step 1: form a company and register.

To register as an NBFC microfinance company, you should first form a public or private company. A minimum of 7 members is required to form a public company. A minimum capital of ₹1 lakh and 2 members are required to form a private company.

STEP 2: Raise the Minimum NOF

You need to raise a minimum capital of ₹5 crores as the Net Owned Fund (NOF). Further, this amount is ₹2 crores for the north-eastern region.

STEP 3: Deposit the Capital

In this step, you need to deposit the capital as a fixed deposit in a bank. The bank will provide a ‘No Lien’ certificate.

STEP 4: Apply for the License

After that, you must apply online for a license from RBI to provide financial assistance. Similarly, along with the application, you should submit certain documents such as

• Memorandum of Association (MoA)
• Articles of Association (AoA)
• Company incorporation certificate
• Board resolution copy
• Auditor’s report regarding receipt of the fixed deposit receipt
• No lien certificate from the banker stating the net owned fund
• Structure plan of the company
• Recent credit report of the directors
• Professional qualification and education proofs of the directors
• Income proof and KYC of the directors
• Proof of experience of the directors in the financial sector.

After the license is obtained, a hard copy of the same must be submitted to the RBI regional office. 

Process for Section 8 Company Registration

Step 1: apply for dsc and din.

The DSC ( Digital Signature Certificate ) and DIN (Director Identification Number) is for the authorisation of the e-forms. So, if the directors of the company don’t have them, the first step is to get these two for the directors of the company.

STEP 2: Apply for name approval

You need to apply for the name approval by filing Form INC-1. Please note that your proposed name must suggest that it is a Section 8 company. The company name must include the words such as ‘foundation’, ‘ micro credit’, or ‘sanstha’. 

STEP 3:  File AoA and MoA

After you receive the name approval, the next step is to draft the Articles of Association (AOA) and the Memorandum of Association (MOA). These should be filed along with specified documents.

STEP 4: Apply for incorporation

You need to file for company incorporation under Form INC-12. Certain documents will have to be submitted along with. These are listed below:

• PAN card copies of all the directors/promoters
• Identity proof documents
• Address proof documents
• Photographs of all the directors/promoters
• Ownership proof of the registered office ( Rental Agreement or owner NoC for rented premises)
• The stamp duty is applicable in the state concerned.

Microfinance Company Registration Fees

The registration cost for microfinance companies varies depending on the type of company. Moreover, the registration cost for the Section 8 company is ₹25,000. Moreover, the registration fees for the NBFCs hover between ₹4 to 5 lakhs at present.

Easiest Way to Set up Your Section 8 Microfinance Company

If you have decided to set up a Section 8 company and find the process overwhelming, we have the easiest solution for you. Vakilsearch can register your Section 8 company for you! Our experts will take care of the whole process and guide you through it. Further, if you have any questions or doubts about the process, you can contact our support team. 

What are the key regulatory requirements for establishing a microfinance company?

Micro-finance companies are governed by the Companies Act of 2013 and the rules and regulations prescribed by the Reserve Bank of India, which is its central regulatory authority.

How can technology be leveraged to streamline operations in a microfinance business setup?

Technology can be leveraged to streamline operations in a microfinance business setup by automating processes, improving customer service, and enhancing transparency and efficiency. This can be achieved through the use of digital platforms, mobile applications, and data analytics to improve lending decisions, track loan performance, and manage risk exposure.

What financial instruments are commonly employed by successful microfinance companies?

Successful microfinance companies in India commonly employ various financial instruments, including microloans, group loans and savings products. These instruments are tailored to the needs of low-income and financially excluded individuals and groups, offering small loans and savings options that cater to their unique financial requirements.

Are there specific qualifications or certifications required to start a microfinance company?

Yes, there are specific qualifications and certifications required to start a microfinance company in India. To know more, request a callback from our experts for a detailed explanation.

In what ways can a microfinance company effectively assess and mitigate risks in its operations?

A microfinance company can effectively assess and mitigate risks in its operations by implementing robust risk management practices, such as credit risk management, market risk management, operational risk management and interest rate risk management.

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Microfinance Business Plan

NOV.05, 2023

Sample Business Plan for Microfinance

Microfinance is a banking service that provides financial assistance to low-income individuals or groups who do not have access to formal financial services. In the US, microfinancing refers to loans of $50,000 or less. Microfinance institutions (MFIs) offer loans, savings, insurance, and other products to help clients improve their livelihoods, reduce their vulnerability, and achieve their goals.

This microfinance business plan template is about a sample microfinance bank that operates in the USA. It will provide an overview of a microfinance bank’s business models, services, customer focus, management team, success factors, financial highlights, and plans. Refer to our financial advisor business plan for a detailed understanding.

Executive Summary

Business overview.

InnoLoan is a microfinance bank that provides affordable and accessible financial services to low-income individuals and small businesses in the USA. Our mission is to empower our customers to improve their livelihoods, create jobs, and contribute to the economic development of their communities.

InnoLoan microfinance bank offers a range of financial products and services to its clients, such as:

• Microloans – Tailored to the needs and capacities of our customers, with flexible repayment terms and competitive interest rates
• Savings products – Help our customers build assets and plan for the future
• Insurance products – Protect our customers from risks and uncertainties
• Money transfer – Enables our customers to send and receive money conveniently and securely
• Financial education program – Equips our customers with the skills and knowledge to manage their finances effectively

Customer Focus

Our target market comprises low-income individuals and small businesses excluded or underserved by the formal financial sector. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services. We segment our customers based on their demographic profile, income level, business activity, and financial needs.

Management Team

We have a strong management team with extensive experience and expertise in microfinance, banking, and social development. Our team is committed to delivering high-quality services to our customers and achieving social and financial impact. We also have a network of well-trained and motivated staff who work closely with our customers at the grassroots level.

Success Factors

Our success factors include:

• Clear vision and mission
• Customer-centric approach
• Diversified product portfolio
• Robust operational system
• Strong risk management framework
• Sound financial performance
• Positive social impact

Financial Highlights

Our financial highlights for the next five years are:

• Projected portfolio growth of 25% annually, reaching $50 million by 2026
• Projected customer base of 100,000 by 2026, with 60% women, 40% youth, 30% minorities, and 70% rural
• Projected revenue growth of 30% annually, reaching $15 million by 2026
• Projected net income growth of 35% annually, reaching $3 million by 2026
• Projected return on equity of 20% by 2026
• Projected operational self-sufficiency of 120% by 2026

Company Overview

Who is innoloan microfinance bank.

InnoLoan microfinance bank, established in 2020 in San Francisco, CA, is a US-registered and regulated bank that offers affordable and accessible financial services to low-income individuals and small businesses.

InnoLoan Micro Lending Company

InnoLoan micro-lending company, a branch of InnoLoan microfinance bank, gives small US businesses microloans from $500 to $10,000. It supports entrepreneurs with good business ideas or who need more capital.

Industry Analysis

The microfinance industry in the USA is a growing and dynamic sector that provides financial services to millions of low-income individuals and small businesses who are excluded or underserved by the formal financial sector. 

According to the Global Microfinance Market Research Report 2023 , the global Microfinance market reached USD 218.31 billion in 2022. The market is expected to achieve USD 447.76 billion by 2028, exhibiting a CAGR of 12.72% during the forecast period.

Here are some more interesting insights on the microfinance industry:

• There are approximately 10,000 microfinance institutions throughout the world. ( Fit Small Business )
• Microfinance institutions worldwide serve more than 140 million borrowers and have a total loan portfolio estimated at $124 billion. ( Microfinance Barometer Report )

Customer Analysis

Demographic profile of target market.

Our target market consists of low-income individuals and small businesses excluded or underserved by the formal financial sector in the USA. We estimate that over 50 million potential customers in this market segment need financial services but lack access to them. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services.

Customer Segmentation

We segment our customers based on their demographic profile, income level, business activity, and financial needs. The following table shows the characteristics and size of our customer segments:

Competitive Analysis

Direct and indirect competitors.

We face direct and indirect competition from various providers of financial services to low-income individuals and small businesses in the USA. 

Some of the direct competitors include:

• MicroVest – A microfinance institution with over $50 million in loans to 100,000 customers. It gives microloans from $100 to $10,000 at 18% interest. It also provides 2% interest savings accounts and life and health insurance.
• MicroFlex – A microfinance institution with over $25 million in loans to 50,000 customers. It gives microloans from $50 to $5,000 at 15% interest. It also provides 1% interest savings accounts and a money transfer service with a 3% fee.

Some of the indirect competitors include:

• Payday lenders – Providers of short-term loans that charge high-interest rates and fees. They target customers who need urgent cash but have poor credit history or no collateral.
• Pawn shops – Providers of loans that require customers to pledge their personal belongings as collateral. They charge high-interest rates and fees and may sell the collateral if the customers fail to repay the loans.
• Credit unions – Non-profit financial cooperatives offering their members loans, savings, and other services. They charge lower interest rates and fees than other providers but have limited outreach and eligibility criteria.

Competitive Advantage

Our competitive advantage is based on the following factors:

Marketing Plan

Our marketing plan is designed to achieve the following objectives:

• To increase our brand awareness and recognition
• To attract new customers and retain existing ones
• To expand our market share and reach by entering new geographic areas
• To enhance our competitive position and reputation

Our marketing plan consists of the following strategies:

• Product strategy – We will continuously improve our products based on customer feedback and market research. We will also introduce new products in the future.
• Price strategy – We will offer competitive and affordable prices that reflect the value and quality of our services. We will also provide incentives and discounts for loyal customers and referrals.
• Place strategy – We will leverage our existing network of branches, agents, and partners to deliver our services to our customers.
• Promotion strategy – We will use traditional and digital media to communicate our value proposition and social impact to our target market and stakeholders.

Operations Plan

Operation function.

Our operations plan describes delivering customer services and managing our internal processes. Our operations plan consists of the following functions:

• Loan origination – We assess and approve microloan applicants using interviews, credit scores, collateral, and group lending, and assist them with the application process.
• Loan disbursement – We deliver the approved loan amount to our customers via cash, bank, mobile money, or prepaid cards, ensuring speed, ease, and safety.
• Loan collection – We collect the loan repayments from our customers as per agreement, using direct debit, mobile money, or cash collection, and monitor the loan performance and contact late customers to prevent defaults and losses.
• Savings mobilization – We offer and manage savings accounts for our customers who want to save money, with good interest rates and no minimum balance, and easy access and withdrawal options through branches, agents, mobile banking, or ATMs.
• Insurance provision – We offer insurance products that protect our customers from life, health, property, and business risks, working with good insurance companies to provide cheap and customized insurance plans, and handling the claims and payments for our customers in case of loss or damage.
• Money transfer service – We offer a money transfer service that allows our customers to send and receive money locally and internationally, working with reliable money transfer operators to provide fast and secure money transfer options, and charging low fees and offering good exchange rates.
• Financial education program – We run a financial education program for our customers who want to learn more, using workshops, seminars, online courses, or mobile apps, and measuring the impact of our program on customers’ financial behavior and well-being.
• January 2024 – Launch of our microfinance bank with all the necessary licenses, registrations, and approvals
• June 2024 – Opening of 10 branches in strategic locations across California
• December 2024 – Reaching 10,000 customers with a loan portfolio of $5 million
• March 2025 – Introduction of new products such as insurance, money transfer, and financial education
• June 2025 – Expansion to new states
• December 2025 – Reaching 50,000 customers with a loan portfolio of $25 million
• March 2026 – Adoption of digital technologies such as mobile banking, online platforms, and biometric identification
• December 2026 – Reaching 100,000 customers with a loan portfolio of $50 million

Financial Plan

Our financial plan provides an overview of our key revenue and costs, funding requirements and use of funds, key assumptions, and financial projections. Refer to our bookkeeping business plan here.

Key Revenue & Costs

Our key revenue sources are:

• Interest income – The income generated from charging interest on our microloans. We charge an average interest rate of 16% per annum on our microloans.
• Fee income – The income generated from charging fees for our services. We charge an average fee of 2% per transaction on our services.
• Other income – The income generated from other sources such as grants, donations, investments, etc. We expect to receive an average of $500,000 annually from other sources.

Our key cost drivers are:

• Operating expenses – The expenses incurred for running our operations, such as salaries, rent, utilities, travel, marketing, etc. Our operating expenses will be 40% of our total revenue.
• Loan loss provision – The provision made for potential losses due to loan default or delinquency. We estimate that our loan loss provision will be 5% of our total loan portfolio.
• Capital expenditure – The expenditure for acquiring or upgrading fixed assets such as equipment, software, vehicles, etc. Our capital expenditure will be 10% of our total revenue.

Funding Requirements and Use of Funds

We require a total funding of $10 million to launch and grow our microfinance bank in the next five years. We plan to raise this funding from various sources such as equity, debt, grants, etc. The following table shows the breakdown of our funding sources and amounts:

Key Assumptions

Our financial plan is based on the following key assumptions:

• Market share – We will capture 0.2% of our target market by 2026 (100,000 customers)
• Portfolio growth – Our loan portfolio will grow at an annual rate of 25% ($50 million by 2026)
• Revenue growth – Our revenue will grow at an annual rate of 30% ($15 million by 2026)
• Net income growth – Our net income will grow at an annual rate of 35% ($3 million by 2026)
• Return on equity – Our return on equity will be 20% by 2026

Income Statement

Balance Sheet

Cash Flow Statement

Hire OGSCapital for Your Microfinance Business Plan

Writing a microfinance business plan is hard and time-consuming. That’s why you should hire us, OGSCapital. We are a team of leading business plan experts, having helped over 5,000 clients attract over $2.7 billion in financing and achieve their business goals. We have a team of experienced and qualified business plan experts and SBA business plan consultants who have worked in various industries and sectors, including microfinance. We know how to create a compelling and customized five-year microfinance business plan that will meet the expectations of your target audience.

We will also provide strategic advice, market research, financial projections, and graphic design to make your micro loan business plan stand out. Contact us for a free consultation and quote for your microfinance business plan template.

Frequently Asked Questions

How much capital is required to start a microfinance company.

In the US, you may need a minimum capital of $5 million to register as a non-banking financial company (NBFC) microfinance institution. You should have a microfinance institution business plan showing your projected income and expenses for the next five years, or refer to our loan officer business plan .

Is the microfinance business profitable?

Microfinance business can be profitable in the US if you deliver high-quality services that meet the needs and preferences of your target market. You can also use digital technologies or a payday loan business plan to manage costs and risks and show your social and financial impact.

How do I start a microfinance business?

To start a microfinance business, you must identify your target market, choose a specialty of finance, create a business plan, and comply with state and federal regulations. You also need a strategic business plan for a microfinance bank that outlines your vision, mission, goals, and strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Tata Capital > Blog > Loan for Business > What Are Microfinance Loans: Meaning, Types & How To Apply

What are microfinance loans: meaning, types & how to apply.

Microfinance has emerged as a powerful tool for financial inclusion and enhancing credit access in India. It provides financial services to low-income individuals and communities who lack access to traditional banking services. One of the most significant aspects of microfinance in India is micro loans, which are small-sized loans offered to the underprivileged to support their livelihoods and small business ventures. Let’s explore what micro lending is, the different types available, their benefits and how you can apply for these loans in India.

What are Microfinance Loans?

Micro Loans, as the name suggests, are small-scale credit facilities provided to small business owners in India. These are provided to those business people who otherwise do not have access to conventional credit facilities. The aim here is to provide them with necessary resources in the form of micro business loans to start their new business, generate a livelihood and boost their savings. These loans are generally of small amounts and the repayment terms are designed to be flexible and affordable for the borrowers.

Different Types of Microfinance

Microfinance facilities can be divided into the following different categories:

Micro Loans

Micro loans are the primary type of microfinance loans. These loans are typically provided to individuals or small entrepreneurs who lack access to traditional banking services due to low income or lack of collateral. The loan amounts are relatively small and are used for various purposes, including starting or growing small businesses, purchasing livestock, funding agricultural activities or meeting urgent financial needs. Micro loans often come with lower interest rates and longer repayment periods than traditional bank loans. One can simply apply for a micro loan online.

Micro Savings

Microfinance institutions also encourage and facilitate micro savings among their clients. These savings products are designed to help individuals build a safety net and develop a habit of saving regularly. Micro savings accounts usually have zero to minimal opening balance requirements and attract interest to motivate people to save more. This financial discipline not only helps individuals manage their expenses but also makes them eligible for larger loans in the future.

Micro Insurance

Micro insurance is another essential aspect of microfinance that provides insurance coverage to vulnerable sections of society. These insurance products are tailored to meet the specific needs of low-income individuals and protect them from various risks, such as health emergencies, crop failures, accidents and natural disasters. Micro insurance ensures that the poor do not fall further into poverty when faced with unforeseen circumstances.

Benefits of Microfinance

Micro lending has several advantages that contribute to the economic development of underprivileged communities. These include:

Financial Inclusion: Microfinance provides access to financial services for those who find it difficult to access credit through the formal banking sector. This is significant for promoting financial inclusion and economic participation.

Poverty Alleviation: By providing capital for income-generating activities, microfinance helps in poverty reduction and the upliftment of these businesses.

Women Empowerment: Microfinance has been instrumental in empowering women by offering them financial independence and decision-making power within households and businesses.

Entrepreneurship Promotion: Micro loans support the growth of small businesses and entrepreneurship, fostering economic growth and job creation at the grassroots level.

Social Development: Microfinance plays a crucial role in addressing social issues like education, healthcare and sanitation by enabling people to afford essential services.

How Microfinance Works in India?

There are two modes through which micro lending operates in India. These are:

SHG Bank Linkage Programme for Microfinance

One of the most successful models of microfinance in India is the Self-Help Group (SHG) Bank Linkage Programme. Under this model, women from the same socioeconomic background come together to form self-help groups. These groups pool their savings, which are then linked to mainstream banks. The banks provide loans to the SHGs, and the groups, in turn, lend the money to their members based on their needs. This programme has been highly effective in reaching the rural poor and empowering women.

Microfinance Institutions

Apart from the SHG Bank Linkage Programme, there are various Microfinance Institutions (MFIs) in India that provide microfinance services. MFIs are specialised financial institutions that offer a range of microfinance products ranging from micro business loans, micro savings and micro insurance. They cater to both rural and urban populations and operate with a mission to alleviate poverty and foster financial inclusion.

How to Apply for Microfinance Loans in India?

Applying for microfinance loans in India typically involves the following steps:

Research: Identify the MFI or SHG operating in your area and research the types of loans they offer, their eligibility criteria, interest rates and repayment terms.

Documentation: Gather the necessary documents, such as identity proof, address proof, income details and any other documents required by the microfinance institution.

Application: Fill out the loan application form provided by the institution and submit it along with the required documents.

Credit Assessment: The institution will conduct a credit assessment to evaluate your repayment capacity and creditworthiness.

Loan Disbursement: If your loan application is approved, the funds will be disbursed to you as per the agreed terms.

Repayment: Make regular repayments as agreed with the institution to maintain a good credit record and be eligible for future loans.

Microfinance facilities such as micro loans, savings and insurance have proven to be a lifeline for the underprivileged in India, enabling them to improve their lives, build sustainable businesses and contribute to the nation's economic growth. Through various micro lending models such as the SHG Bank Linkage Programme and Microfinance Institutions, lakhs of people have gained access to financial services and opportunities for socio-economic development.

With the changing financial landscape, financial institutions like TATA Capital are also actively working towards increasing credit access. You can apply for different financing facilities such as business loans and personal loans to meet your financing needs. As microfinance continues to evolve and expand, it will play an increasingly significant role in addressing poverty and promoting financial inclusion in the country.

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Microfinance Bank Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business ideas » Financial Service Industry » Bank

Are you about starting a Microfinance bank? If YES, here is a complete sample Microfinance bank business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a Microfinance bank . We also took it further by analyzing and drafting a sample Microfinance bank marketing plan template backed up by actionable guerrilla marketing ideas for Microfinance banks. So let’s proceed to the business planning section.

Microfinance banks are small banks that offer loans, savings and insurance to entrepreneurs and small business owners who can’t access traditional sources of capital, like banks or investors. The main objective of microfinance banks is to provide people with money to invest in themselves or their business.

Microfinance banks are different from commercial banks. For instance, funding to commercial banks usually take place through public offers (stock markets) in the form of equity, while Microfinance banks usually receive their funding from individuals/private equity holders in the form of debt.

Also most of the services commercial banks offer are bank door services, which mean the customers’ need to go to the banks to avail themselves such financial services. But most of the services provided by Microfinance banks are door step services, which means the staff of the banks deliver their financial services at client’s door step.

Starting a microfinance bank in modern America won’t be an easy task, but nothing they say can stop the success of a determined mind. Below is a well drafted business plan if you want to start Microfinance bank in the Nigeria .

A Sample Microfinance Bank Business Plan Template

1. industry overview.

Microfinance banks provide microloans to individuals and small businesses. These individuals and small businesses tend to go for loans to be able to pay for the purchase of real estate and other transactions. This demand in turn makes the microfinance bank business a recession-proof business.

According to industry reports, the stages of growth and development of a microfinance industry are usually classified into four segments, for ease of analysis. These are the pioneer stage, the breakout stage, the consolidation stage and the maturity stage.

The requirements for the survival of an industry at each of the different stages of development may differ significantly. And so are the nutrients and corrective action in case of challenges.

Report has it that the Nigerian microfinance industry started officially in 2005 (the International Year of Microcredit as declared by the United Nations) with the release by the Central Bank, of the Microfinance Policy Framework for Nigeria. Note that the practice of microfinance or its precursor, microcredit, has been in Nigeria for a much longer time.

It manifested in the activities of moneylenders, regulated under the Moneylenders Act, and other different forms of rural or informal credit market operations. We believe that the high end of it existed in the form of Non-governmental Organizations (NGOs), governed by cooperative rules and regulations.

Industry pioneers were motivated by the need to help in canalizing financial resources, basically in the form of microcredit, to micro-enterprises that constitute over 90 percent of Nigerian business entities. It is believed that 70% of over 170 million Nigerians live below the poverty line. Evidently therefore, there was a lot to do in the area of the fight against poverty, and microfinance was a fitting instrumentality.

2. Executive Summary

Ambassador Microfinance Bank, LLC (AMB LLC) is a new microfinance bank in Asaba, Delta State, that will provide micro lending and mortgage loan services to small businesses, real estate professionals, builders and individual home buyers.

AMB LLC has access to a full range of microfinances and we offer the right loans–with the best rates, terms and costs–to meet our client’s basic needs. We hope to bring high-quality micro lending and mortgage loan services to residential and business customers scattered all over Asaba.

Our plan at AMB LLC is to create a family like platform at our bank, where customers can feel comfortable to analyze the services they want. We also plan to create a unique work environment that is challenging, rewarding, innovative, and respectful of our customers and employee’s needs.

Asaba is a city strategically located on a hill at the western edge of the Niger River, overlooking its sister city, Onitsha, across the Niger Bridge. This beautiful city is the capital of Delta State Nigeria. A fast developing urban area, Asaba has a population of 149,603 as at the 2006 census, and a metropolitan population of over half a million people.

This city was established during the time of the Royal Niger Company (now UACN) and is currently relishing the status of being the administrative capital of Delta state, but due to the fact that Aniocha-Oshimili people maintain the identity of being Igbo, a lot of Igbo from the east of the Niger river invest in Delta state and precisely at Asaba thus improving the economic fortunes of Asaba area and Delta state in general.

The Delta State government also contributes to the economic development of this city by ensuring an economic platform where small businesses can thrive. Also the construction of a multipurpose dam at Ubu River could be useful in generating electricity.

AMB LLC is created as an L.L.C. in order to avoid double taxation found with a corporation yet realizing the benefits of personal liability avoidance. We will be occupying a standard office facility in the business district of the city, giving us the suitable traffic to attract customers.

We have put plans in place to ensure we mould AMB LLC into the very best in the niche we have chosen. We at AMB LLC have also identified several milestones which will act as ambitious yet achievable goals for the business.

By establishing the goals, the need to reach them will develop an implicit incentive for all members to work hard to achieve the milestones. AMB LLC is capitalized by two principal investors, Mr Innocent Udensi and Mrs Martha Asika. Both are well renowned in the micro lending industry with a combined experience of over 25 years in the industry.

3. Our Products and Services

We at AMB LLC plan to offer unique services within the confines of the micro lending and mortgage loan services. We have analysed our industry and have settled for services we can offer our clients effectively. We have also employed a solid workforce with the specific talents to help us offer these services.

We plan to do everything within the proximity of the law to reach our business goals. Our business offering are listed below;

• Provide loans to small businesses
• Providing equipment loans
• Providing vehicle loans
• Offer residential mortgages
• Providing mortgage financing online
• Providing home equity loans online
• Providing an online mortgage marketplace
• Offer commercial and industrial mortgages
• Providing home equity loans
• Offer residential mortgages loans online
• Providing other related loan cum mortgage consulting and advisory services

4. Our Mission and Vision Statement

• Our vision at Ambassador Microfinance Bank is to build a reliable partnership with individuals, small businesses and corporate clients in Asaba Delta State.
• We plan to provide better services and be regarded better in all of Delta State.
• Our mission at Ambassador Microfinance Bank is to provide professional, reliable and trusted microloan services that will help individuals, small businesses, corporate organization, and non-profit organizations to reach their desired goals.
• We plan to build a business that will become one of the leading microfinance banks in all of Delta State.

Our Business Structure

We at AMB LLC understand that micro finance banks operate in the same way other banks and micro lending services firms do. These financial service institutions get people to invest with them and pay them interest, while lending out that money to people who ask for loans and charge interest on those loans.

We have done our research and have decided to improvise or adopt a business process and structure that will guarantee us good return on investment (ROI), efficiency and flexibility. We have explicitly listed the portfolios we plan to fill and work with at AMB LLC.

We believe that these portfolios will be filled with well experienced and learned individuals, who understand and are ready to align with our company’s visions.

We also hope to hire people that are qualified, hardworking, and creative, result driven, customer centric and are ready to work to help us build a prosperous business that will benefit all our stakeholders (the owners, workforce, and customers).

Chief Executive Officer

• Business consultant

Human Resource and Admin Manager

Sales and Marketing director

Company accountant

• Loan officers
• Debt collectors

Receptionist

5. Job Roles and Responsibilities

• The Chief Executive Officer will be tasked with providing work direction for the business
• He will be tasked with building, communicating, and implementing the vision, mission, and direction of AMB LLC – which also includes leading the achievement and implementation of all strategies.
• The Chief Executive Officer is also tasked with fixing prices and signing business deals for the business
• He is also in charge of employment
• He also pays workers salary
• He signs checks and documents for and on behalf of the agency
• The Chief Executive Officer also evaluates the success of the organization

Business Consultant

• Will be tasked with providing residential microloans
• In charge of providing commercial and industrial microloans
• Will be obligated to provide home equity loans
• Also provides equipment loans
• Charged with providing vehicle loans
• Providing residential mortgages loans online
• Is also tasked with fixing micro and mortgage financing online
• The business consultant is also charged with fixing home equity loans online
• Provides an online micro and mortgage marketplace for the company
• Also in charge of providing mortgage related loan cum lending consultancy
• Oversees the running of HR and administrative tasks for AMB LLC
• Tasked with Monitoring office supplies by checking stocks; placing and expediting orders; evaluating new products.
• Makes sure of the operation of equipment by completing preventive maintenance requirements; calling for repairs.
• Tasked with stating job positions for recruitment and managing interviewing process
• In charge of organizing induction for new team members
• Tasked with organizing trainings, evaluation and assessment of employees
• In charge of arranging travel, meetings and appointments
• Tasked with overseeing the smooth running of the daily office activities.
• In charge of organizing external research and coordinating all the internal sources of information to retain the organizations’ best customers and attract new ones
• Expected to understand, prioritizes, and reaches out to new partners, and business opportunities et al
• The sales and marketing director is also charged with creating, executing and evaluating new plans for expanding sales
• Keeps all customer contact and information
• Represents the company in strategic meetings
• Aid to increase sales and growth for the business
• The company accountant is in charge of preparing financial reports, budgets, and financial statement
• Also provides the managements with financial analyses, development budgets, and accounting reports
• The company accountant is also tasked with the company’s financial forecasting and risks analysis.
• Should be able to understand and take care of the firm’s cash management, general ledger accounting, and financial reporting
• Tasked with developing and managing financial systems and policies
• The company secretary is also responsible of administering payrolls
• Ensures that AMB LLC complies with taxation legislation
• Also take care of all financial transactions for AMB LLC
• Is the internal auditor for the organization

Loan Officer

• Communicating to customers why their loan was either approved or denied and providing evidence to back up those determinations.
• Keeping loan documents and conversations private in order to maintain customer confidence.
• Staying up-to-date with any changes in the industry by furthering your knowledge of the business through educational opportunities, participating in business-related seminars, and professional networking.
• Responding promptly to phone calls and emails from customers about their loan or loan application process.
• Meeting with individuals and businesses in order to accurately analyze their credit, financial status and any property they have.
• Being able to handle any customer complaints and questions about the loan process and having the ability to fix any lingering issues related to their particular loan.
• Advising customers and helping them accrue the various copies of individual and business-related financial documents, credit histories and whichever other financial documents are required in order to fulfill the loan requirements.
• Providing loan applicants with the various types of credit options available and the terms related to those options.
• Explaining to potential customers the viability of certain loans in relation to an individuals or businesses financial standing.
• Denying or approving loans based on the specific financial limits of the individual or business and being able to offer alternatives when necessary.
• Being able to adequately resolve any snags in the mortgage application process.
• Submitting any and all paperwork related to the loan to credit analysts in order to make sure that loan applicants can get their documents verified and therefore recommended towards the right type of loan for them.
• Figuring out the different payment scheduling options available to customers, as well as helping to review and update any loan or credit files.
• Operating with class and adhering to all laws, regulations, and compliance guidelines.

Debt Collector

• Keep track of assigned accounts to identify outstanding debts
• Plan course of action to recover outstanding payments
• Locate and contact debtors to inquire of their payment status
• Negotiate payoff deadlines or payment plans
• Handle questions or complaints
• Investigate and resolve discrepancies
• Create trust relationships with debtors when possible to avoid future issues
• Alert superiors of debtors unwilling or unable to pay when necessary
• Comply with requirements when legal action is unavoidable
• The receptionist is expected to welcome clients by greeting them in person or on the telephone; answering or directing inquiries.
• Is tasked with providing all clients with a personalized customer service experience of the highest level
• Is expected to use every opportunity to build client’s interest in the company’s products and services
• Be aware of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
• The receptionist will also receive parcels / documents for the company
• It’s tagged with distributing mails in the organization
• Handles any other duties as assigned by the Admin manager
• In charge of the cleaning the floors of AMB LLC facility
• Keep note and make sure the toiletries and supplies don’t run out of stock
• Ensures that both the interior and exterior of the firm are always clean
• Handles any other duty as assigned by the restaurant manager.

Security guard

• The security guard is in charge of protecting the firm and it’s environs
• Also controls traffic and organize parking
• Should also patrol around the building on a 24 hours basis
• It’s expected to give security reports weekly

6. SWOT Analysis

Our plan as a microfinance bank is to establish well– structured microloan services that will be of good help to our clients. That is why we contacted an experienced consultancy firm, a firm known for its precise way of doing business and also renowned for offering the best.

We employed the services of Jefferson consults to help us conduct a SWOT Analysis in our designated business location. Below is a summary from the result of the SWOT analysis that was conducted for AMB LLC;

According to our SWOT analysis, our strength at AMB LLC rests on the capacity, vision and experience of our team. We can boast of having a team that is prepared to offer our clients the very best; a team that is well placed, professional and ready to pay attention to details and to maximize financial profits for the business.

According to our SWOT analysis conducted by Jefferson Consults, our weakness at AMB LLC will be the time it will take us to break into the market and gain acceptance since we are just a new microfinance bank. But we have designed a marketing plan that will take us through that stage as quickly as possible.

• Opportunities

We at AMB LLC understand the enormous opportunities in the lending industry, especially judging by the number of people, business startups and corporate organizations who are all in need of microloans to help them reach their individual goals and vision.

AMB LLC being a standard and well positioned Microfinance bank is well prepared to offer microloan and mortgage loan services to see to the needs of this growing target audience.

Jefferson Consults in the SWOT analysis conducted for AMB LLC noted that our threat in this business will include unfavourable government policies, the introduction of a competitor within our location of operation and global economic downturn which usually affects purchasing / spending power.

They went further to advise us at AMB LLC to be aware of huge losses in three situations: due to sharp, sustained increases in interest rates, accounting control fraud, or the collapse of hyper-inflated residential real estate bubbles. That is why to mitigate these threats, we have introduced the use of credit scoring software and we have created counter plans for each possible threat.

7. MARKET ANALYSIS

• Market Trend

We at AMB LLC understand that the formal introduction of a national policy on microfinance would change a lot of things in the industry. It will legitimize the illegal operators; and encourage the inflow of capital funds to the sector. That is why some of the pioneer institutions in the industry have transferred their already public positive attributes to become industry leaders.

LAPO microfinance is still the number one player in this field creating wealth and blazing the trail. We at AMB LLC believe that policy objective at the pioneer stage of the industry should centre on the promotion of stability and confidence.

Regulation should be strict and transparent or at least evoke the image of transparency, while intervention is swift, all in a bid to win popular confidence of stakeholders.

Experts in the industry expect a huge expansion in the number of participants. This is strategically driven by the level of success achieved by the pioneers. Being a monopolistically competitive market, the fairly easily achievable conditions for entry (licensing) enable profit-seekers to come and compete for the presumed profit available in the sector.

According to statistics, Nigeria now has over one thousand microfinance banks and several providers organised as NGOs. This is a clear indicator that the industry in Nigeria is attractive to investors who are willingly staking their capital.

8. Our Target Market

Our first aim at AMB LLC is to serve small to medium sized business, from new ventures to other bigger businesses and individual clients.

We plan to be decisive in all steps and approach our market one step at a time. We at AMB LLC plan to offer the best possible microloan services, hence we’ve made sure all our employees are well trained and equipped to serve a diverse range of clientele base.

Our target audience at AMB LLC will cut across businesses of different sizes and individuals. Outlined below is the list of businesses and organizations that we have categorically designed our products and services for;

• Small businesses
• Individuals and interested home owners
• Real Estate companies and investors
• Non-governmental organizations
• House of worships and other religious organizations
• Educational institutions
• Corporate companies

Our competitive advantage

We at AMB LLC understand that the level of competition in the microfinance banking industry does not in any way depend on the location of the business since most micro finance banks and other microloan businesses can operate online and from any part of the world and still effectively compete in the industry.

We have made plans to ensure we penetrate the market and offer our customers what they really want – easy access to microloans; thereby deleting the hard and long process needed to obtain loans from the bank and other financial institutions.

Another advantage we have in this industry is the quality and experience of our workforce. The owners, down to every employee at AMB LLC, are all well trained to function well in the microfinance industry.

We have also, through the help of Jefferson Consult, established a comfortable business environment for our employees by offering work bonus and loyalty bonus which will be calculated with more or less 10 years duration. This we believe will push our employees to give their all and stay loyal to the business and also help build a classic competitive microfinance bank.

9. SALES AND MARKETING STRATEGY

• Sources of Income

AMB LLC was established to serve a specific need in the industry and to also generate substantial revenue. Although our goal at AMB LLC is customer satisfaction in the microloan business, but as a business, we want to make profits and grow our enterprise.

We plan to generate income by offering the following microloan services to individuals, real estate companies, NGOs and corporate organization. We plan to maximize profits by offering the following services;

• Provide equipment loans
• Provide vehicle loans
• Provide mortgage financing online
• Provide home equity loans online
• Provide an online mortgage marketplace
• Provide home equity loans
• Provide other related loan cum mortgage consulting and advisory services

10. Sales Forecast

Our sales forecast at AMB LLC was conducted in a conservative fashion to avoid any inflated expectations that might not be obtainable. We acknowledge that the first few months of business will be slow. AMB LLC has projected steady, incremental growth in sales.

This can be explained as a function of the increased proficiency in terms of sales for AMB LLC services as well as the growing awareness of AMB LLC by the target customers.

Reviewed below is a detailed sales forecast for AMB LLC, which we believe and hope we will surpass with hard work and perseverance. This sales forecast is also based on the location of our business and the innovative business we will be offering to our clients.

• First Fiscal Year: N1, 650,000
• Second Fiscal Year: N2, 590,000
• Third Fiscal Year: N4, 328,000
• Marketing Strategy and Sales Strategy

Our marketing effort at AMB LLC will focus on our ability to empower people to make a substantial difference in their world while getting a great return on their money. We plan to make use of magazine advertisements and community based marketing (networking, sponsorship and participation in seminars) to grow our business visibility.

We plan to make our advertisements steady so that people will become aware of the investment options we offer at our bank. We will participate in numerous on-topic events and seminars that will display AMB LLC as experts as well as give us a podium to describe our different services. We hope to make use of the listed strategies to build our business;

• We plan to introduce AMB LLC by sending introductory letters with our business brochure to individuals, households, corporate organizations, schools, players in the real estate sector etc
• We also plan to advertise AMB LLC in important financial and business related magazines, newspapers, TV and radio stations
• We also plan to attend important international and local real estate , finance and business expos, seminars, and business fairs et al
• We also hope to create different packages for different category of clients (individuals, startups and established corporate organizations) in order to work with their budgets
• We also plan to make use the internet to promote our business
• We hope to encourage word of mouth marketing from loyal and satisfied clients

11. Publicity and Advertising Strategy

In order to achieve our publicity and awareness goals, we at AMB LLC have contacted the services of Stella Maris Advertising Experts, a renowned venture in business development and publicity, to help us create publicity and advertising strategies that will help us at AMB LLC to attract and keep our target audience interested. Listed below is the summary of capable strategies suggested by Stella Maris Advertising Experts for AMB LLC;

• Place adverts on both print (community based newspapers and magazines) and electronic media platforms; we will also advertise AMB LLC on financial magazines, real estate and other relevant financial programs on radio and TV
• Sponsor relevant community based events
• Leverage various online platforms to promote the business. This will make it easier for people to enter our website with just a click of the mouse. We will take advantage of the internet and social media platforms such as; Instagram, Facebook , twitter, YouTube, Google + et al to promote our brand
• Place our billboards in strategic locations all around Asaba – Delta State.
• Share and distribute our fliers and handbills in target areas all around Asaba
• Ensure that all our workers wear our branded shirts and all our official vehicles are branded with our company’s logo.

12. Our Pricing Strategy

It’s very important to state that the microfinance industry is moved by the increase in demand and availability of real estate / properties. That is why there can never be a price model that will be suitable for the general lending industry. Indeed the prices for properties and human needs fluctuate on a regular basis.

We at AMB LLC also understand that most lending firms rely on commissions since they serve as middlemen between those seeking for microloans and the secondary financiers. But we hope to establish a more direct approach by offering those loans ourselves which can be very possible due to the large incentives our founders are willing to inject.

Our plan is to keep the prices of our services and commissions below the average market rate for our clients for the main time.

We also hope to provide them with loans coupled with low interest rates that will bring them closer to the bank, and we hope to move our prices a little higher when we have achieved a substantial corporate identity in the microfinance business.

• Payment Options

We at AMB LLC have concluded plans to provide a wide variety of payment options for our clients. We understand the need and the diverse countenances of people, and we plan to provide a suitable platform that will suit all equally. We have chosen a well renowned bank in the Nigeria to help make payment easier for our clients.

We have chosen and opened a corporate current account with Capital one financial Corporation. Our bank account numbers will be made available in website and promotional materials to clients who may want to make cash deposit and it will also be given to clients on request. Listed below are the payment options that we will make available to AMB LLC.

• Payment through bank transfer
• Payment through online bank transfer
• Payment with check
• Payment with bank draft
• Cash payment to debt collectors

13. Startup Expenditure (Budget)

The need for funds can’t be overlooked in the type of services we plan to offer at AMB LLC. We understand that we need funds to put together a competitive business, especially in Nigeria. We need funds to get a phone system, workstation computers, back end server, DSL Internet connection, and laser printer.

Funds are needed to get office furniture, meeting room and waiting room furniture; to settle monthly service charge for KDB software, purchase a Fax machine, copier, lighting, and assorted office supplies. We have analyzed our needs and we plan to spend our startup funds judiciously. Outlined below is a detailed financial projection and costing for starting AMB LLC;

• Price of incorporating the Business in the Nigeria of America – N15,000.
• Our budget for basic insurance policy covers, permits and business license – N200,000
• Acquiring a suitable Office facility opposite the city hall at Asaba Delta State (Re – Construction of the facility inclusive) – N175,000
• The budget envisaged for capitalization (working capital) – N20 million
• Budget for settling other legal processes (acquiring business license and all city dues et al) – N20,500
• Equipping the office with suitable and standard equipment(computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – N110,000
• Purchasing of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – N10,500
• Launching AMB LLC official Website – N16,000
• Our expenditure for paying at least three employees for 3 months plus utility bills – N120, 000
• Other Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – N40,000
• Miscellaneous: N80,000

With the above detailed cost analysis , we need N5m and N20 million working capital to successfully set up AMB LLC.

Note-: This cost is rather on the low-end as we didn’t factor in the cost of obtaining CBN license for a Microfinance bank, which can either be N20million or N100million or N1billion ; depending on the size and operational style of your Microfinance bank.

• Generating Startup Capital for AMB LLC

AMB LLC is a licensed and registered Microfinance bank which is capitalized by two principal investors, Mr Innocent Udensi and Mr Martha Asika.

Our founders plan to become the very first financiers of the business, although we have plans of accepting partners at a very ripe and mature stage in the business. Due to less constraint in financing AMB Mortgages, we have outlined the few ways we can acknowledge funding and startup capital. These ways may include;

• Generate part of the startup capital from the two principal investors
• Accept soft loans from family members and friends
• Agreeing to angel investors
• Apply for business loan from the bank (if need be)

Note : AMB LLC has been able to generate an enormous N5 million from its two principal investors, who aligned and individually dished out N2,500,000 each. We have also aligned with an angel investor to inject N20 million into AMB LLC, with the hope of making profits and establishing a solid business.

14. Sustainability and Expansion Strategy

It is the goal of every business venture to grow and remain consistent in making profits and acquiring customers. The baseline of every business lies in the number of loyal customers in their clientele base and the competence of their employees, investment procedures and the business structure they choose. We at AMB LLC understand our market and we have established plans that will carry us thus far.

We believe with our unique business structure and competent hands will be able to help us make the right decisions and start making profits from our forts year in business. We also understand that one of the strategies of gaining approval and winning customers over is to offer innovative services to our customers at a more affordable rate than what is obtainable in the industry.

We have also made sure that we established the right platform, structures and processes. We plan to make sure all our employees are well catered for and presented with an environment that will help them stay innovative and current. AMB LLC will be run and managed like a family with excellent values and ethics.

We have also put together a profit-sharing arrangement which will enable our management staff enjoy the fruit of their labour.

This arrangement will be decided upon during a considerable duration of 5 years and upon decision of the board of the organization. With these and many more attractive employees focused incentives, we hope to hire and retain employees that are the best in any field they are hired for.

Check List/Milestone

• Business Name Availability Check:>Completed
• Business Incorporation: Completed
• Opening of Corporate Bank Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Conducting feasibility studies: Completed
• Leasing, renovating and equipping our facility: Completed
• Generating part of the startup capital from the founder: Completed
• Applications for Loan from our Bankers: In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents: In Progress
• Design of The Company’s Logo: Completed
• Printing of Promotional Materials: Completed
• Recruitment of employees: In Progress
• Purchase of the Needed software applications, furniture, office equipment, electronic appliances and facility facelift: In progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business (Business PR): In Progress
• Health and Safety and Fire Safety Arrangement: In Progress
• Establishing business relationship with banks, financial lending institutions, vendors and key players in the industry: In Progress

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11 Best Micro Finance Company In India 2022

Last updated – 04 Jan 2022

Microfinance term relates to a small amount of credit facility offered primarily to the low-income group, unbanked and marginalized people in rural and semi-urban areas

The microloans support livelihoods in the rural areas where banks are very far and access to formal banking services is remote. 

Microfinance helps rural communities, women and people who are involved in agricultural and small business activities.

What are Microfinance Companies 

Microfinance companies are non-banking finance (NBFC) companies registered with Reserve Bank of India (RBI) that offer short term loans to people at lower interest rates than primary lenders. 

They handhold people with their credit needs like a friend in need and also teach them basic savings & finance skills. Microfinance companies go-ahead to provide loans for personal consumption like house appliances, mobile and cycle loans. 

Microfinance companies focus on rural or semi-urban areas where people need money urgently for a short time period usually for a period of 1 to 2 years. 

Microfinance companies on one hand work closely with women entrepreneurs for helping them start small tailoring shops, art and craft shops and local produce businesses. 

On the other hand microfinance companies make loans to MSME, for housing and starting dairy businesses. 

How Microfinance Companies Work 

Microfinance Institutions (MFIs) need to have a license from RBI to start their operations. MFIs offer collateral-free loans of up to Rs. 50,000 (in some cases up to 1,00,000) to small businesses or individuals. 

You can understand how microfinance companies work with the help of this video. 

Microfinance companies have lines of credit from commercial banks which they then offer as microloans. In short, they are funded by the banks and financial institutions.

Microfinance companies charge higher interest rates (20% to 30%) on microloans as compared to banks but the interest rates are still lower when compared to private lenders in the market.

Working Model of Microfinance Companies in India

#1. self help group (shg).

Self Help Group is an informal group of small entrepreneurs with similar socio-economic backgrounds. Small entrepreneurs including women come together to create a common fund to meet the emergency needs of their business. The SHG is a savings oriented group.

They fix periodic meets, open an account with a microfinance company and save regularly in the fund, and when any group member needs funds, he gets that from the collective savings.

These groups are generally non-profit self-sustaining organizations. The group itself takes care of the responsibility of debt recovery.

Self-help groups get money on credit from the bank like NABARD and SIDBI once they become stable and present a track record of regular repayments of their borrowers.

#2. Joint Liability Group (JLG)

Joint Liability Group concept for microfinance was started by NABARD. JLG is a group of 4-10 small farmers, rural entrepreneurs, people of the same village/locality having the same socioeconomic background.

The JLG is formed with the purpose of availing loan from a microfinance company without any collateral. The JLG is for income generation, activity-oriented groups.

Microfinance companies can finance a JLG in two ways 

• Financing to the group directly
• Financing to the individual in the groups

However, in both cases, all members of JLG are responsible for repaying the loan amount.

Here are the 11 Best Microfinance Companies in India 2022

Best Microfinance Companies in India Working as Banks

#1. bandhan bank limited.

Earlier Bandhan Bank Limited was known as Bandhan Financial Services Limited, the largest microfinance company based out of Kolkata.

Bandhan Financial Services Limited received the banking license from RBI in April 2014. Presently, Bandhan Bank Limited has 4559 banking outlets helping it reach 2.01 crore customers. 

Bandhan Bank Limited still serves the rural and low-income earners and has a total advance portfolio of Rs. 71,846 crore as of 31st March 2020.

The micro banking loans offered are

• Suchana microloan
• Su-briddhi microloan
• Srishti microloan
• Susikhsha microloan
• Samadhan loan

Pros of Bandhan Bank

• Has vast experience in microfinance
• Now offers other banking services
• Dedicate microfinance loans

Cons of Bandhan Bank

• Most of the banking outlets in eastern India
• Also working as a bank 

Check out – Best banks for personal loans in India

 #2. Ujjivan Small Finance Bank

Ujjivan Financial Services Limited (UFSL) started microfinance operations in 2005. The company received a license from RBI in October 2015 to start Ujjivan Small Finance Bank.

The microfinance based bank still offers a full range of financial services to the ‘economically active poor’. The Ujjivan Bank microloans are under individual loans & group loans.

Ujjivan Small Finance Bank has a diversified portfolio with branches spread across 24 states with a customer base of over 4.9 million. 

Pros of Ujjivan Small Finance Bank

• Earlier experience as a micro financer
• Spread across 24 states

Cons of Ujjivan Small Finance Bank

• Most of the banking outlets in southern India

#3. Equitas Small Finance Bank

Equitas Small Finance Bank started the microfinance business in 2007 with 4 branches. In 2015, Equitas received RBI approval for starting a small finance bank.

Equitas Small Finance Bank still caters to the economically weaker section (EWS) and low-income group (LIG). It provides small loans ranging from Rs. 5,000 to Rs. 50,000 for income generation purposes.

Pros of Equitas Small Finance Bank

• Past experience as a micro financier
• Offers net banking, deposits, payments and other banking services

Cons of Equitas Small Finance Bank

• Loan amount limited to Rs. 50,000

Also check – How to make smart investment portfolio

#4. Suryoday Small Finance Bank

Suryoday small finance bank has its genesis in Suryoday Microfinance Private Limited. After eight years of microfinance, the company started its banking operations in January 2017.

Suryoday aims to bring the best banking solutions to the ‘banked’, ‘under-banked’ and the ‘un-banked’ sections of the society and to continue its microfinance lending.

Suryoday works on Joint liability group loans for income-generating activities.

Pros of Suryoday Small Finance Bank

• Previous experience as a micro financier
• Small banking services

Cons of Suryoday Small Finance Bank

• The micro-credit amount is limited to Rs. 52,500.

Also read – Best family health insurance plan in India

Best Microfinance Companies for MSME and Micro Loans

#5. satin creditcare network limited .

Satin Creditcare Network Limited is a Gurugram, Haryana based microfinance company that offers a diversified suite of products to serve the under-privileged segments of the society.

Satin Creditcare Network primarily works on the Joint Liability Group model to provide collateral-free microcredit facilities in rural, semi-urban and urban areas. 

The loans offered include solar loans, loans for purchasing cycle, home appliances, mobile, creating water and sanitation facilities. 

Satin Creditcare Network Limited has operations in 22 states and reaches 85,000+ villages. Satin offers MSME loans and also finances other microfinance companies. 

Pros of Satin Creditcare Network Limited 

• Products for personal loan and business needs
• Operations in 22 states
• Loans to other microfinance companies

Cons of Satin Creditcare Network Limited 

• Works only on Joint Liability Group model

#6. Annapurna Finance Pvt. Ltd

Annapurna Finance Pvt. Ltd was established in 2009 with the aim to provide microfinance to the interior unserved areas of Odisha. The company addresses the economic necessities of poor women at their doorstep. 

Annapurna Finance registered as a microfinance company in 2013 and now offers 

• Group loans
• MSME Finance
• Housing Finance
• Micro Credit 
• Business loans

Annapurna Finance uses both SHG and JLG models and reaches 1.9 million clients through 718 branches and has a loan portfolio of over Rs. 4000 crores. 

Pros of Annapurna Finance Pvt. Ltd

• Microfinance and MSME loan
• Housing finance loans available

Cons of Annapurna Finance Pvt. Ltd

• Operations majorly in the eastern part of India

You may also like to read – Best term life insurance plans in India

#7. Arohan Financial Services Pvt. Ltd

Arohan Financial Services Limited is a Kolkata based microfinance company that is a part of the Aavishkaar-Intellecap Group.

Arohan Financial Services is on a mission to empower the underserved through a range of financial services. The company has an outstanding loan portfolio of Rs. 4857 Crores and operates through 711 branches in 10 states.

Arohan Financial Services offers microfinance loans and also MSME lending services. The loans’ purposes include solar loan, mobile, sanitation, cycle and loans for trade & services. 

Pros of Arohan Financial Services Pvt. Ltd

• Microcredit and MSME loans
• Operates through 711 branches in 10 states

Cons of Arohan Financial Services Pvt. Ltd

• Operates majorly in the east and north-east India

Also check – Best instant loan app without salary slip

Best Microfinance Companies Focused on Women Upliftment 

#8.  muthoot microfin limited .

Muthoot Microfin Limited is the microfinance arm of the large Muthoot Pappachan Group. The microfinance company provides micro-loans to women entrepreneurs with a focus on rural areas of the country.

Muthoot Microfin Limited works on a joint liability group model of microfinance and caters exclusively to women in lower-income households. 

Muthoot Microfin microloans include

• Income-generating loans like for dairy
• Life betterment loans like education, mobile, solar loans
• Health and hygiene loans like water and sanitation loans

Pros of Muthoot Microfin Limited 

• Part of Muthoot  Pappachan Group
• Focused on rural women entrepreneurs

Cons of Muthoot Microfin Limited 

• Limited to only rural women entrepreneurs

#9. CreditAccess Grameen Limited

CreditAccess Grameen was first visualized by Mrs. Vinatha M. Reddy and founded in May 1999 as a project under the T. Muniswamappa Trust in South Bangalore.

Over a period of time, the microfinance activities of the trust were transferred to CreditAccess Grameen company. 

The microfinance company caters to the need for timely and affordable credit to India’s poor and low-income households with a focus on women’s upliftment.

CreditAccess Grameen has over 29 lakhs borrowers in 230+ districts and operates through over 900+ branches. 

CreditAccess Grameen offers income generation loans, home improvement, emergency and family welfare loans. 

Pros of CreditAccess Grameen Limited

• Offers non-financial assistance like workshops
• Dedicated to women upliftment
• 900+ branches

Cons of CreditAccess Grameen Limited

• Focused only on women entrepreneurship

#10. Sonata Finance Private Limited 

Sonata Finance is a Lucknow based microfinance company providing financial resources to enable poor women of rural, semi-urban and urban communities.

The microfinance company is developing a scalable and growing business that covers a significant number of poor households. 

Sonata Finance has a loan portfolio of Rs. 1600 crores and operates through 488+ branches. 

The microloans include both individual and group lending for income generation, sanitation, home improvement, two-wheeler and utility loans. 

Pros of Sonata Finance Private Limited 

• Various microloan products
• Focused on women upliftment

Cons of Sonata Finance Private Limited 

• Most of the outlets in the northern part of India
• Works only on Joint-liability model

#11. Fusion Microfinance Private Limited

Fusion Microfinance aims to provide underprivileged women with economic opportunities to transform the quality of their lives.

The Delhi based microfinance company was set up in 2010 and operates in a Joint Liability Group lending model of Grameen. 

Fusion Microfinance offers income-generating microloans and emergency loans to women living in rural & semi-urban areas. They should belong to the marginalized community, whose annual household income is up to Rs. 2 Lakhs.

Pros of Fusion Microfinance Private Limited

• Focused on underprivileged women 
• Offers insurance products & financial literacy programs

Cons of Fusion Microfinance Private Limited

• North India based operations
• Loan amount limited to Rs. 60,000

Final Words

Microfinance companies play a big role in uplifting the rural youth, women and people bringing them the formal channels of credit. Now the village people can get easy loans from microfinance companies instead of depending on the local lenders who exploit them.

Microfinance is a resource through which amenities like sanitation, solar electricity and water can be made available. In short, the microfinance companies are trying to bridge the social and economic gap between rural and modern India.  

Strategic Plans of Microfinance Firm

Project/slides/presentation transcript, subject: strategic management, topic:  strategic plans of microfinance firm.

Introduction

Ten years into the second millennium and sixty five years after our India gained independence, more than 37% of our country’s population lives below the poverty line. More than 22% of the entire rural population and 15% of the urban population of India exists in this terrible financial predicament.  It is important to note that 30% of the country’s poor take loans from MICROFINANCE INSTITUTIONS. This project gives a comprehensive view of the status and contribution of this sector to our economic growth and development. After much research, we have identified the strategic plans followed by these path-breaking institutions and analyzed their success with respect to generic management strategies. The Indian microfinance industry is the world’s largest microfinance industry. The objectives of these firms range from poverty alleviation, women empowerment, promoting gender equality and developing an entrepreneurial spirit within the population. With such multi-faceted goals, STRATEGIC PLANNING becomes the foundation on which all the business activities can be connected and aligned. A strategic plan for such a unique business model must challenge assumptions, gather input from the internal as well as external environment and effective implementation. To get further insight into these plans, we interviewed several experts, collected information from reliable sources and ultimately focused our study on the working of Hindusthan Microfinance Private Limited.

Methodology

Our group did a lot of research on the importance of strategic planning, the types of strategic plans and the entire structural framework on microfinance and its penetration in our country. For this purpose, we studied numerous research papers, journals, business magazines and data from the Microfinance Information Exchange.

Upon identifying the various types of microfinance firms, we interviewed senior managers and employees in firms dealing with microfinance. For this, we prepared a detailed questionnaire that included questions on growth, marketing and organizational strategies as well as the challenges and opportunities in microfinance today. We visited a Post Office to inquire about the Small Savings Schemes, spoke at length with a Senior Analyst from ICICI Microfinance and interviewed the Managing Director as well as Vice President-Operations of Hindusthan Microfinance Private Limited.

We decided to focus our research project to the workings of the latter firm. After collecting all the relevant data, we conducted a comprehensive analysis of the firm’s strategies. A SWOT analysis as well as a PESTEL analysis has been thoroughly done to identify the gaps and strengths of the firm. Upon brainstorming, we have also given a few recommendations to the firm for superior performance.

Theories and Past Studies

Microfinance theoreticians have advanced two theories regarding their aims-an economic and a psychological . The economic theory treats microfinance institutions (MFIs) as infant industries, while the psychological theory differentiates microfinance entrepreneurs from traditional money lenders by portraying them as “social consciousness driven people.”

• Past Studies :

Global Partnerships Theory and Credit Lending Model

Global Partnerships expands opportunity for people living in poverty by investing affordable capital and management expertise in select MFI institutions (MFIs) in Latin America.

Consulting services in credit risk and delinquency management for leading rural MFI, including crisis management and loan portfolio restructuring – Eastern Europe, 2009-2010 Analysis of root causes of high delinquency; reengineering of credit risk management and loan collection (including the design of delinquency policies and an arrears committee); development of risk procedure and risk management reports; recommendations regarding development of MIS reports to allow for appropriate risk management and loan portfolio tracking; and training of credit staff and branch managers.

Private International Investment Group

Development of Business Plan for the establishment of a greenfield commercial bank providing MSE and (home-collected) retail loans – Russian Federation, 2009 Market review and competitive analysis; design of business strategy and roll-out plan; development of operating model; financial modelling and development of financial projections; and preparation of business plan document.

Establishment and development of a greenfield MFI – Argentina, 2004 to date Design and establishment of greenfield microfinance institution, including the establishment of lending operations (credit methodology, operating model, incentive systems, policies and procedures, credit process, loan collection, information systems, and so on); recruitment and training of staff; implementation of proprietary credit information system of GMG; senior management roles.

Consulting services in support of the transformation of a leading MFI into a regulated commercial bank – Eastern Europe, 2009 Gap analysis for transformation with special emphasis on organisational, legal and financial aspects; feasibility check including development of strategy and action plan for transformation; assistance in the elaboration of business plan.

Microfinance: An Overview

Microfinance refers to a movement that envisions a world in which low-income households have permanent access to a range of high quality financial services to finance their income-producing activities, build assets, stabilize consumption, and protect against risks. These services are not limited to credit, but include savings, insurance, and money transfers. Microfinance has widely helped the poor and provided them the opportunities for starting their own business or enterprise by lending a loan at minimal collateral. Microfinance clients are usually self-employed, household-based entrepreneurs. Their diverse “microenterprises” include small retail shops, street vending, artisanal manufacture, and service provision. In rural areas, micro-entrepreneurs often have small income-generating activities such as food processing and trade; some but far from all are farmers. They take financial intermediation, like this, seriously and devote considerable effort to finding workable solutions.

Microfinance is a development strategy that provides credit and savings services to the poor, particularly rural women, for income-generating projects. In addition to providing economic benefits, microfinance is also an effective vehicle for women’s empowerment.

Micro-financing Institutions are of the following types:

Government based Profit making Institute, Government based non-Profit making Institute, A Profit making NGO, A Non-profit NGO. Be it any of these institutions, the basic strategies are similar.

The Case For Microfinance Firms in India

According to the World Bank, India is categorized as a “low-income” country. 70% of the population resides in rural areas, of which 60% of people depend on agriculture. Consequently, there is chronic under-employment and per capita income is only $ 3262.  The country is a victim of abject poverty,low rate of education, low sex ratio, and exploitation. The major factor for such high incidence of rural poverty is the low asset base . Rural people have very limited access to institutionalized credit. Microfinance, when strategically planned and implemented, can be an important tool for economic growth. A recent survey conducted showed that there are approximately 147 microfinance firms functioning well in India that are able to satisfy the needs of people.

To focus our study on the strategic plans followed by microfinance firms, we approached a new microfinance institution, Hindustan Microfinance Private Limited that operates in Mumbai and provides various small loans to people unable to attain credit at larger banks.  This bank gives loans to those who want to expand their business, start a business or use money for emergent matters and helps clients improve their financial management skills.

Hindusthan Microfinance Private Limited: A Company Profile

Mission : To offer credit and other financial products to the urban poor of India.

Vision : To provide financial services to 200,000 clients by 2013 and 500,00 clients by 2015

Type of MFI : Non Banking Financial Corporation

Founded In : March 2008

Founder : Mr. Anil Jadhav

Clientele : 100% women

Strategic Plans of Microfinance Firms

There are various kinds of strategies that are implemented by organizations for efficient running and effective achievement of goals. They can be for overall growth, marketing, finance, personnel, product mix, organizational or price. Here, we take a look at the strategies followed by MFIs and more specifically, whether Hindusthan Microfinance Private Limited executes these plans.

Growth Strategies :

In growing and competitive markets MFIs are likely to take more risks to acquire new customers and expand their product offerings. Hindusthan Microfinance Private Limited(HMPL) has adopted ingredients from the Grameen Bank model. Earlier, microfinance concentrated on rural areas, but off late, there has been a significant increase in the microfinance activities provided to the urban areas. Even the involvement of females in microfinance has risen from 20% to 97% over a period of 33 years. HMPL currently does not engage in non-financial services but seeing a demand for the same, plans to introduce them in the near future. While HMPL concentrates on providing financial resources only to the urban poor as of now, it plans to diversify into the rural sector in Maharashtra by the month of January, 2011.

For the year 2009, microfinance in India has registered a growth rate of a whopping 30% and world wide 13%.One of the risks of high-powered growth is that MFIs may neglect customer services and relationships, even losing the face-to-face relationships with their clients that are critical to credit quality.

Market Penetration of HMPL from 2009-2010; Estimated Market Penetration by March 2011

Financial Strategies:

Microcredit refers to very small loans given to those who lack financial collateral and steady employment to spur entrepreneurship. It is a very important part of every microfinance firm’s financial strategy and aims bringing it into mainstream financial systems. HMPL provides credit loans to a group of 5-6 women at a time. The interest rates on the loans are very high (29%- 35%) mainly due to the high operational costs, low primary lending rates and low return on equity. As per company policy, if the borrower dies, the firm collects Rs. 100 from everyone who is utilizing the services and the dead person’s account is written off. The company does not take any deposits from its customers.

Organization Strategies :

Over the past few years, with evolvement of Microfinance in our country, there are various changes, which have taken place organizationally. While earlier microfinance operated only with a social objective, now more equity and funding is coming in that influences their overall strategies. HMPL, primarily a microfinance institution has sought “Non Banking Financial Company” status from RBI to get wide access to funding, including bank finance. Partners include HDFC Bank, Yes Bank, ABN Amro etc. However they still rely heavily on donations from charities and trusts for adequate funding. The clientele is 100% women who are known to be more responsible with money in rural areas. The most sustainable strategy is to train the community in leadership and managerial functions for them to become effective participants. The organization is well-placed in terms of its reputation in the industry as an organization with best practices.

Product Mix :

HMPL sells products ranging from a price of Rs. 5,000 to 50,000.  The ticket size is considerably low, considering there is limited financial collateral provided by the clients. This also eases loan repayment. HMPL follows a  Joint Liability Group model like Grameen Bank, under

which, an average of 5 women form a group, and each of them take liability for each other . Social collateral, is thus high and members persuade the defaulter to repay the loan or the liability of the loan falls on the group.

Personnel Strategies :

Human Resource has largely been a neglected area in the microfinance institutions world-wide yet, the proper placement of right people in right jobs is essential. HMPL selects field officers who have in-depth knowledge of their neighboring areas and are trustworthy enough to handle money and take up the responsibility of a few villages at a time. Even individuals who have only passed their 10 th Board Examination are given specialized training to effectively carry out the work and cut costs. High salaries are given to the top management for strategizing and designing plans.

Marketing Strategies :

Microfinance firms adopt different market strategies depending on their scale of business. While large scale operating MFI’s would use newspapers, magazines and television, small-based firms cannot afford such activities. HMPL, a relatively small firm, resorts to mass meetings and personal marketing on a regular basis with its clients. They use social media platforms such as Facebook to advertise, and also have a regular newsletter Hindusthan Monthly coming out soon.

Comprehensive Analysis:Strategic Plans of Microfinance Firm

S.W.O.T Analysis of Hindusthan Microfinance Private Ltd.

PESTEL Analysis:

The Macroenvironmental factors Hindusthan Microfinance Private Limited must take into account while strategic planning

Political Factors:

1)  Even after 6 decades of independence, the government and the RBI have not been efficient enough to make laws for MFIs so transparency is still missing. On charges of coercion due to non-payment,  Andhra Pradesh Microfinance Ordinance was passed on October 15, 2010. The Ordinance requires MFIs to register with the state government and gives the state government the power to shut down MFI activity. A number of NBFCs have been affected by the ordinance.

2)  There is political stress from the parties in the neighborhood on MFIs to loan individuals who are not qualified for the loans (financially well off).

3)  Government often intervenes with MFIs because of heavy interest rates charged by MFIs.

Economic Factors:

A Micro finance Institution has more expenses compared to a normal commercial bank. The same amount of money is being distributed among a number of clients as compared to in a commercial bank. Thus more space, stationery, efforts are required to store the data which in turn increases the expense. To cover these expenses, the interest rates charged are exorbitant.

Social Factors:

1) The clients that most of the NGOs focus on are women. Women empowerment through Microfinance is the main mission of such firms. They not only provide capital but also basic knowledge of starting any business/ enterprise on their own. Later on these women can go and consult other commercial banks for bigger loans.

2) Many times, the better halves of such deprived women use them as a source of retrieving money from MFIs and use it for their own personal whims and fancies.

3) Certain sectors of the Indian society are still not broad minded enough to let women come forward and start their own business/enterprise. Thus MFIs lose most of their clientele due to such social backwardness.

4) MFIs provide loans to people with very low collateral. There are individuals who take loans from MFIs but do not utilize it for the stated purpose or repay it on time with the proper interest rates turning into bad debts and thus a loss for the Institution.

Technological Factors:

Technology can reduce transaction costs and improve transparency in delivering financial services, both of which can translate into increased access and lower costs for many lower-income clients. Challenges include the high cost and limited availability of existing technological solutions, lack of widely available local technical support to support MIS software, consumer adoption rates of technology, lack of basic communications infrastructure in many remote places etc. Despite the appeal of advanced delivery technologies, relatively few financial institutions have successfully deployed them to reach poor and low-income clients. Developing a solid management information system still remains one of the most important tasks facing microfinance institutions, particularly those scaling up.

Environment Factors:

India has a history of highly innovative watershed projects in which downstream landholders share benefits by compensating landless people upstream for providing an environmental service. Most current projects, however, take alternative measures that ignore the issue of environmental services. Evidence from 70 villages in Maharashtra suggests the presence of poverty alleviation trade-offs, highlighting the potential value of more explicitly addressing compensation for environmental services.

Legal Factors:

As of now no laws have been passed regarding MFIs. But two-three months down the line, laws and amendments are prone to take place. The Indian government proposes to introduce a bill to regulate microfinance institutions. India’s central bank currently does not regulate interest rates charged by micro lenders, but issues a fair practice code on interest rates to non-banking financial companies.The Department of Financial Services proposes to introduce the Micro Finance (Development & Regulation) Bill, 2010, after taking into account the views of RBI (Reserve Bank of India) and the Malegam Committee recommendations.

Recommendations for Hindusthan Microfinance Private Limited

• The firm must expand to rural and semi-rural areas in the state of Maharashtra as soon as possible as over 20% of the population in these areas lives below the poverty line.
• The firm must conduct market surveys on a regular basis to assess the growing needs of clients. They must make an effort to deliver non-financial services such as business training, management of family budget, literacy training, health services, access to social workers, gender sensitization to facilitate financial sustainability.
• With the number of mobile handsets increasing in India, they should explore Credit Sms-the future of microfinance as a viable option. By helping MFIs integrate mobile payments into their business strategies, it will eliminate geographic barriers to financial inclusion while simultaneously allowing users to generate robust auditing trails and client credit histories.

We firmly believe that an integrated approach to servicing clients can enhance microfinance’s effectiveness as a poverty alleviation tool. The fight to alleviate poverty is too great a task for anyone or any one discipline to combat it alone. As an entrenched and recognized leader in this mission, microfinance can serve as a bridge beyond banking and development. It can be the link that brings together the services and products available today to the people who need them most. Only through a collective effort will we have the best chance of succeeding.

• http://www.tmtctata.com/Emerging_Markets_and_Blue_Ocean_Strategy.pd
• http://www.microfinancegateway.org/gm/document-1.9.27597/33800_file_Tara_EPW_MF_April_2005.pd
• http://web.mit.edu/watsan/Docs/Other%20Documents/KAF/Serafini%20-%20Microfinance%20of%20KAF%20in%20Nepal.pdf
• http://www.ibscdc.org/Case_Studies/Strategy/Business%20Models/BSM0060A.htm
• http://www.mixmarket.org/
• http://en.wikipedia.org/wiki/NBFC_%26_MFI_in_India
• http://www.hindusthanmfi.com/

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PPT ON MICRO FINANCE

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• 1. INTRODUCTION  Microfinance is defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals which fall just above the nationally defined poverty line, and poor individuals which fall below that poverty line, with the goal of creating social value. The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital for micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
• 2. Concept and Features of Micro- finance:  It is a tool for empowerment of the poorest.  Delivery is normally through Self Help Groups (SHGs).  It is essentially for promoting self- employment, generally used for:  It is a tool for empowerment of the poorest.  Delivery is normally through Self Help Groups (SHGs).  It is essentially for promoting self- employment, generally used for:  It is not just a financing system, but a tool for social change, specially for women.  Because micro credit is aimed at the poorest, micro-finance lending technology needs to mimic
• 3. LITRATURE REVIEW  Mohammed AnisurRahaman (2007) Has examined that about microfinance and to investigate the impact of microfinance on the poor people of the society with the main focus on Bangladesh. We mainly concise our thesis through client’s (the poor people, who borrowed loan from microfinance institutions) perspective and build up our research based on it.  SusyCheston (2002) Has examined that Microfinance has the potential to have a powerful impact on women’s empowerment. Although microfinance is not always empowering for all women, most women do experience some degree of empowerment as a result.  Linda Mayoux (Feb 2006) Has examined that Micro-finance programmes not only give women and men access to savings and credit, but reach millions of people worldwide bringing them together regularly in organized groups.
• 4. INDUSTRY PROFILE  The Origin of Microfinance  Although neither of the terms microcredit or microfinance were used in the academic literature nor by development aid practitioners before the 1980s or 1990s, respectively, the concept of providing financial services to low income people is much older.  While the emergence of informal financial institutions in Nigeria dates back to the 15th century, they were first established in Europe during the 18th century as a response to the enormous increase in poverty since the end of the extended European wars (1618 – 1648). In 1720 the first loan fund targeting poor people was founded in Ireland by the author Jonathan Swift.
• 5. Role of Microfinance:-  The micro credit of microfinance progamme was first initiated in the year 1976 in Bangladesh with promise of providing credit to the poor without collateral , alleviating poverty and unleashing human creativity and endeavor of the poor people. Microfinance impact studies have demonstrated that
• 6. Legal Regulations  Banks in India are regulated and supervised by the Reserve Bank of India (RBI) under the RBI Act of 1934, Banking Regulation Act, Regional Rural Banks Act, and the Cooperative Societies Acts of the respective state governments for cooperative banks.
• 7. Microfinance in India  At present lending to the economically active poor both rural and urban is pegged at around Rs.7000 crores in the Indian banks’ credit outstanding. As against this, according to even the most conservative estimates, the total demand for credit requirements for this part of Indian society is somewhere around Rs.2,00,000 crores.
• 8. Microfinance changing the face of poor India  Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the 'unreached poor'. In the Indian context terms like "small and marginal farmers", " rural artisans" and "economically weaker sections" have been used to broadly define micro- finance customers. Research across the globe has shown that, over time, microfinance clients increase their income and assets, increase the number of years of schooling their children receive, and improve the health and nutrition of their families.
• 9. Distribution of Indebted Rural Households: Agency wise Credit Agency Percentage of Rural Households Government 6.1 Cooperative Societies 21.6 Commercial banks and RRBs 33.7 Insurance 0.3 Provident Fund 0.7 Other Institutional Sources 1.6 All Institutional Agencies 64.0 Landlord 4.0 Agricultural Moneylenders 7.0 Professional Moneylenders 10.5 Relatives and Friends 5.5
• 10. Self Help Groups (SHGs)  Self- help groups (SHGs) play today a major role in poverty alleviation in rural India. A growing number of poor people (mostly women) in various parts of India are members of SHGs and actively engage in savings and credit (S/C), as well as in other activities (income generation, natural resources management, literacy, child care and nutrition, etc.). The S/C focus in the SHG is the most prominent element and offers a chance to create some control over capital, albeit in very small amounts. The SHG system has proven to be very relevant and effective in offering women the possibility to break gradually away from exploitation and isolation.
• 11. Bank Partnership Model  This model is an innovative way of financing MFIs. The bank is the lender and the MFI acts as an agent for handling items of work relating to credit monitoring, supervision and recovery. In other words, the MFI acts as an agent and takes care of all relationships with the client, from first contact to final repayment. The model has the potential to significantly increase the amount of funding that MFIs can leverage on a relatively small equity base.  A sub - variation of this model is where the MFI, as an NBFC, holds the individual loans on its books for a while before securitizing them and selling them to the bank. Such refinancing through securitization enables the MFI enlarged funding access
• 12. Marketing of Microfinance Products:-  Contract Farming and Credit Bundling Banks and financial institutions have been partners in contract farming schemes, set up to enhance credit. Basically, this is a doable model.  Agri Service Centre – Rabo India Rabo India Finance Pvt. Ltd. has established agri-service centres in rural areas in cooperation with a number of agri- input and farm services companies.  Non Traditional Markets Similarly, Mother Dairy Foods Processing, a wholly owned subsidiary of National Dairy Development Board (NDDB) has established auction markets for horticulture producers in Bangalore.
• 13. Commercial banksas Microfinance Vehicles  Commercial banks recently have stepped into the realm of microfinance. They have taken tentative but very important steps toward distributing Microfinance loans to the poor. One advantage of these institutions is that they bring in the risks management practices that they regularly use in their commercial operations risk management practices that they regularly use in their commercial operations. The other important aspect they bring in is the professional credit appraisal practices that are used in their normal operations. These important features combined with a mission to provide the poor entrepreneurs will enhance the social lives and they can run their business effectively with proper access to credit. In some cases, successful microfinance NGOs have transformed themselves into for profit commercial banks (BancoSol of Bolivia is a prime example of a microfinance NGO that has successfully transformed itself into a for- profit commercial bank).
• 14. MICROFINANCE INSTITUTIONS  Microfinance institutions are perhaps one of the most important vehicles to reach the rural poor. These institutions can act as very important tool to provide the rural entrepreneurs with micro-loans, which will help them to start their own businesses and sustain them. One advantage that these institutions have over other financial services delivery vehicles is the focus. While NGOs have to straddle with various non-financial and financial services activities and commercial bank with other operations. MFIs can solely focus on providing the financial service to the poor since the very objective of starting this kind of institution is to provide financial services in the rural areas.
• 15. ICICI Bank launches new initiative in micro-finance  ICICI Bank has taken a stake of under 20 per cent in Financial Information Network and Operations Private Ltd (FINO), which was launched on Thursday, July 13, 2001.  FINO would provide technological solutions as well as services to finance providers to reach the underserved in the country. ICICI Bank is the lead facilitator.  According to Mr. NachiketMor, Deputy Managing Director, ICICI Bank, FINO is an independent entity. "We would reduce our stake in the company when required," he said.  ICICI Bank expects to target 200 micro-finance institutions (MFIs) by March 2007, he said, speaking on the sidelines of the press conference to launch FINO. At present, the bank has tie-ups with 100 MFIs.
• 16. Core banking products  FINO has partnered with IBM and i-flex to offer core banking products. It would also provide credit bureau services, which includes individual customer credit rating and analytics based on transaction history. It also launched biometric cards for customers, which would be a proof of identity and give collateral to them. The card would also offer multiple products including savings, loans, insurance, recurring deposits, fixed deposits and remittances. The company would also build-up customer database, thus bringing them into mainstream banking.
• 17. ICICI Bank's thrust on micro- finance  CHENNAI, MARCH 9. ICICI Bank has entered into partnerships with various microfinance institutions (MFI) and non- Government organizations (NGOs) to scale up its micro lending business. Addressing presspersons here, today, NachiketMor, Executive Director, ICICI Bank, said, the partnership model would provide assured source of funding to NGOs and MFIs. The bank had extended advances to the tune of Rs.150 crores as on February 29, this year, under this scheme, Mr. Mor said.  The bank had acquired a network of self-help groups (SHGs) developed by the erstwhile Bank of Madura after its merger with ICICI Bank. Since then the SHG programme had grown substantially and 10,175 groups had been promoted reaching out to 2.03 lakh women spread across 2,398 villages, the Executive Director said.
• 18. MICROFINANCE AND WOMEN EMPOWERMENT  Women as micro and small entrepreneurs have increasingly become the key target group for micro finance programs. Consequently, providing access to micro finance facilities is not only considered a pre- condition for poverty alleviation, but also considered as a strategy for empowering women. In developing countries like INDIA micro finance is playing an important role, promoting gender equality and is helping in empowering women so that they can live quality life with dignity.  The study conducted by FINCA Client Poverty Assessment conducted in 2003 revealed that of the interviewed clients 81 percent were women, and it was found that food security was 15 percent higher among their village banking clients than non-clients. The report also showed clients to have 11 percent more of their children enrolled in school with an 18 percent increase in healthcare benefits. Clients’ housing security was reported as 18 percent higher than non-clients.
• 19. EMPOWERMENT: FOCUS ON POOR WOMEN  Women have been the vulnerable section of society and constitute a sizeable segment of the poverty-struck population. Women face gender specific barriers to access education health, employment etc. Micro finance deals with women below the poverty line. Micro loans are available solely and entirely to this target group of women. There are several reason for this: Among the poor , the poor women are most disadvantaged –they are characterized by lack of education and access of resources, both of which is required to help them work their way out of poverty and for upward economic and social mobility. The problem is more acute for women in countries like India, despite the fact that women’s labor makes a critical contribution to the economy.
• 20. MICRO FINANCE INSTRUMENT FOR WOMEN’S EMPOWERMENT  Micro Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro finance scene is dominated by Self Help Groups (SHGs) – Bank Linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the “unreached poor”. Based on the philosophy of peer pressure and group savings as collateral substitute , the SHG programme has been successful in not only in meeting peculiar needs of the rural poor, but also in strengthening collective self-help capacities of the poor at the local level, leading to their empowerment. Micro Finance for the poor and women has received extensive recognition as a strategy for poverty reduction and for economic empowerment.
• 21. OBJECTIVES OF THE STUDY:  To study the impact of micro finance in empowering the social economic status of women and developing of social entrepreneurship.  To know about relationship between SHG’s members, micro finance banks and entrepreneur’s women.  To clarify the limitation of microfinance programmes as the tool for women’s empowerment and the type of support service necessary to maximize the contribution of microfinance service.  To study potential hurdles in the development of women entrepreneurship
• 22. RESEARCH METHODOLOGY  Research methodology is a framework for the study and is used as a guide in collecting and analyzing the data. It is a strategy specifying which approach will be used for gathering and analyzing the data. it also includes time and cost budget since most studies are done under these two constraints. The research methodology includes overall research design, the sampling procedure, the data collection method and analysis procedure.
• 23. METHOD OF DATA COLLECTION  After the research problem has been identified and selected the next step is to gather the requisite data. While deciding After the research problem has been identified and selected the next step is to gather the requisite data. While deciding about the method of data collection to be used for the researcher should keep in mind two types of data i.e. primary and secondary.  Primary Data The primary data are those, which are collected afresh and for the first time, and thus happened to be original in character.  Secondary Data The secondary data on the other hand, are those which have already been collected by someone else and which have already been passed through the statistical processes
• 24. ANALYSIS AND INTERPRETATION OF DATA Particular Year Total SHGs All Women SHGs % ofWomanGroups No. Amount No. Amount No. Amount SHG Savingswith banks as on 31st March 2009-10 69.53 6198.71 53.10 4498.66 76.4 72.6 2010-11 74.62 7016.30 60.98 5298.65 81.7 75.5 Loan disbursed to SHGs during the year 2009-10 15.87 14453.3 12.94 12429.37 81.6 86 2010-11 11.96 14547.73 10.17 12622.33 85 86.8 Loan outstanding against SHGs as on 31st March 2009-10 48.51 28038.28 38.98 23030.36 80.30 82.1 2010-11 47.87 31221.17 39.84 26123.75 83.2 83.7

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