Strategic Consideration by Financial Institutions for MF in India

1
Strategic Consideration by Financial
Institutions for MF in India
2
Rural Financial Market

• Rural finance Financial services used in rural
  areas by people of all income levels
• Agricultural finance Financing of
  agriculture-related activities
• Microfinance Financial services for poor and
  low-income people

Financial sector
Rural Finance
Micro- finance
Agricultural finance
3

• 1969 - nationalisation of major commercial
  banks
• minimum priority sector lending (40)
• minimum agricultural lending (18)
• minimum weaker section lending (10)
• regulated interest rates on deposits and loans,
  generally rural loans cheaper
• special poor-targeted programmes
• 1975 - Regional Rural Banks started

4
Rural Financial Sector in India

• Over 139,000 rural retail outlets of formal
  banking system
• commercial banks - 33,000
• RRBs - 14,500
• cooperatives - 92,000
• Population per rural outlet 4,700
• Historically, rural credit targeted through
• Cooperatives consolidation for rural
  masses

5
mFIs Various Types
Cannot accept deposits
NGOs Trusts Section 25 Companies
I. Not for Profit -
II. Mutual Benefit - Coops, MACS
III. For Profit - NBFCs
6

• Credit through specialised Microfinance
  Institutions (MFIs)
• SIDBI Foundation for Micro Credit (SFMC)
• Rashtriya Mahila Kosh
• Self Help Group Bank Linkage Programme

7
Validated Models of micro Credit Delivery
Individuals
Banks
Grameen groups
Groups
Self Help Groups
NGOs, Government, Banks, Others
SHPIs
8
Validated Models of Credit Delivery Contd..

• SHGs
• Grameen groups
• Individuals
• Others ( watershed,
• credit unions etc)

NGO - mFIs
Banks
Apex Bodies
Second Tier Institutions (FWWB/RGVN)
Donors (including International Agencies)
9
SHG-BANK LINKAGE MODELS
BANK
BANK
BANK
NGO as SHPI FI
BANK as SHPI
NGO as SHPI
SHG
SHG
SHG
MODEL-I
MODEL-II
MODEL-III
10
SHG Group Mode - Features
11
H. Variant Initiatives

• DFI Bank-SHPI (14)
• Bank
  NGO, GO-SHPI (70)
•  
• Poor SHG mFI
  (NGO,Fed of SHGs)
•  
• DFI Bank Donor
• (16)

12
BANGLADESH GRAMEEN BANK MODEL

• A RESEARCH PROJECT IN CHITTAGONG IN 1976
• CONVERTED AS A PILOT PROJECT IN 1978
• BBANK SET UP BY ORDINANCE IN 1983
• PROF Md. YUNUS THE MAN STARTED AND
• CONTINUING AS MANAGING DIRECTOR OF
• GRAMEEN BANK

13
BOARD OF GOVERNANCE

• 13 MEMBER BOARD COMPRISING
• MANAGING DIRECTOR CEO
• 9 BORROWER SHARE HOLDERS
• FROM MINISTRY AND OTHERS
• BOARD DECIDES P0LICY
• ISSUES FOR THE BANK

14
Structure

• Pyramidal Structure
• Group of 5 poor persons with a leader
• 6-8 Groups form one Centre
• One Branch for 50 60 Centres
• One Area Office for 10-12 Branches
• One Zonal Office for 8 area Offices
• Head Office

15
PRODUCTS
16
Performance Highlights ( March end)
17
Grameen Group Mode Features.
18
(No Transcript)
19
SHG Federation Models

• Promoted by NGOs DRDA in AP to ensure
  sustainability of SHGs
• Creates economies of scale for providing
  essential services
• Reduces transaction cost at all levels
• Reduces default rates at all levels
• Enables provision of value added financial
  non-financial services
• Reduces cost of promotion of new SHGs
• Enhances the Empowerment of poor

20
SHG Federation DHAN Model
Banks
Groups of 15-20 Members
Cluster Development Associations of 15 20 Groups
in 4-5 villages
Federations of 15 20 CDAs At the Block Level
Apex Banks
21
Functions of CDA

• Facilitating Bank Linkage
• Internal auditing of SHGs
• Capacity Building of Members and Leaders
• Conflict Resolution
• Promotion of new Groups
• Intermediate financial transaction between Groups
  on developmental Issues

22
Functions of Federations

• Facilitating Bulk Lending from Banks
• Responsible for housing insurance programmes
• Capacity Building of Clusters
• Facilitating linkage with district administration
• Support to other Federation Groups

23
SEWA Bank Model

• Initiative led by Elaben Bhatt
• Self-Employed Womens Association was registered
  as a trade union in April 1972
• 318 527 members in 7 cities
• 4000 women started coop bank in December 1973
  in May 74 registered as a CO-Op bank with RBI
  approval
• Organisation network includes fully computerised
  Head Office, 11 collection centers also equipped
  with computers,70 staff members
• Governance through board comprising 16 members
• Doorstep banking through mobile vans, handholder
  team comprising 15 field workers assisted by Bank
  sathis

24
Products and Services

• Range of Savings loan products
• Insurance products to take care of life,
  accident, maternity,losses in riots/floods/cyclone
  s etc.
• Personal financial social counseling
• Loans through individuals or SHGs
• Regular savings for one year is a must for
  availing loan
• Maximum unsecured loan of Rs 25000 per individual
• No collateral but a guarantor possessing a valid
  pay slip
• ROI 17 per annum on depositors credit fund
• ROI 14 per annum on borrowed funds

25
SEWA BANK - Trends in Performance