Scribd
Upload
2K views18 pages

Issues and Success Factors in Micro Financing

The document discusses microfinancing in India, focusing on ICICI Bank. It provides an overview of microfinancing concepts and mechanisms like self-help groups and microfinance institutions. ICICI Bank uses both self-help group and MFI models to provide microloans and other financial services. The document also analyzes the contribution of SHGs and MFIs, key issues in microfinancing like sustainability and lack of capital, and factors in the success of NGOs and financial institutions in microfinancing.

Uploaded by

priyani
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
2K views18 pages

Issues and Success Factors in Micro Financing

The document discusses microfinancing in India, focusing on ICICI Bank. It provides an overview of microfinancing concepts and mechanisms like self-help groups and microfinance institutions. ICICI Bank uses both self-help group and MFI models to provide microloans and other financial services. The document also analyzes the contribution of SHGs and MFIs, key issues in microfinancing like sustainability and lack of capital, and factors in the success of NGOs and financial institutions in microfinancing.

Uploaded by

priyani
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 18

“Issues and success factors in

Micro financing”
Special emphasize on ICICI
Presented by:

Priya Sharma
MBA -4th semester
2k8-MRCE-MBA-038
OBJECTIVE OF THE STUDY
 The report provides an overview of the current state of microfinance in
India .
 Covering extensively the two primary facilitators of microfinance -
microfinance Institutions (MFIs) and SHG’s bank linkage programme
(SBLP).
 Concept of self help groups in Indian scenario
 Activities included in micro finance and working mechanism of icici bank
in this concern.
 Success factors and issue factors of micro finance in India to solve the
problem of poverty.
 Role and functions of financial institutions in India.
MICROFINANCE
 Microfinance, a concept popularized by Muhammad Yunus, has grown
tremendously in India.
 The growing understanding of achieving self sustainability among the rural
and urban poor has led to the acceptance and implementation of this idea
across India.
 Any activity that targets poor and low-income individuals for the provision
of financial services, with the goal of creating social value.
 Microfinance is an economic development approach that involves
providing financial services through institutions to low income clients.
 The range of activities undertaken in microfinance include group lending,
individual lending, the provision of savings and insurance, capacity
building, and agricultural business development services.
Use of micro finance for people
 Micro credit
 Micro savings
 Micro insurance
 remittances
FACTS ………….
 Banking with the poor is a challenging task as the nature of
demand requires doorstep services, flexibility in timings,
timely availability of services, low value and high volume
transactions and require simple processes with minimum
documentation.
The nature of supply however involves high cost
of service delivery, rigid, inflexible timings and procedures
and high transaction costs for the customers.
 The reach of the banking sector in the rural areas was as low as 15% in
terms of credit potential, and 18% in terms of population with physical
access to a bank branch.
COMPANY PROFILE- ICICI Bank
 ICICI Bank has been highly successful in the microfinance sector,
primarily because of its innovative microfinance business models.
 ICICI Bank chose to pursue the untreated rural markets as part of its
strategy of being a universal bank.
 Offers a wide range of banking products and financial services to corporate
and retail customers through a variety of delivery channels and through its
specialized subsidiaries and affiliates in the areas of investment banking,
life and non-life insurance, venture capital and asset management.
Initiation to Microfinance - The SHG
Bank Linkage Model
 To enable its foray into the rural markets, ICICI Bank merged with the
Bank of Madura (est.1943), which had a substantial network of 77
branches in the rural areas of a South Indian state – Tamil Nadu.
 Within three years of the merger with Bank of Madura, ICICI Bank had
extended its reach to 12000 SHGs.
The SHGs had been repaying at very good rates, above 95%, yet there was a
need to control the quality of group formation and link it to credit
discipline.
Microfinance Institutions (MFI)
Intermediation Model
 The MFIs were willing to take on the risk of the financial performance of the
groups/ individuals that were being lent to.
 this channel was better for leveraging large amounts of funds without necessarily
having a grassroots level presence of the bank staff
 For instance there was a double charge on capital created, once at the level of the
Bank lending to the MFI and secondly at the level of the MFI on lending to the
client.
MICROFINANCE IN INDIA
SHG
 It is generally accepted that SHGs often do not include the poorest of the
poor, for reasons such as:
 (a) Social factors

(the poorest are often those who are socially marginalized because of caste
affiliation and those who are most skeptical of the potential benefits of
collective action).
 (b) Economic factors

(the poorest often do not have the financial resources to contribute to the
savings and pay membership fees; they are often the ones who migrate
during the lean season, thus making group membership difficult).
 (c) Intrinsic biases of the implementing organizations

(as the poorest of the poor are the most difficult to reach and motivate,
implementing agencies tend to leave them out, preferring to focus on the
next wealth category).
SKS MICROFINANCE &
BANDHAN
 Its borrowers include agricultural laborers, street vendors, home based
artisans, and small scale producers. Its model is based on 3 principles-
 Adopt a profit-oriented approach in order to access commercial
capital
 Standardize products, training, and other processes in order to boost
capacity
 Use Technology to reduce costs and limit errors

 Bandhan opened its first microfinance branch at Bagnan in Howrah district


of West Bengal in July 2002. Bandhan started with 2 branches in the year
2002-03 only in the state of West Bengal and today it has grown as strong
as 412 branches across 6 states of the country
DATA ANALYSIS
contribution in india

SHG MFI

25%

75%
ISSUES

 Sustainability
 Lack of Capital
 Financial service delivery
 HR Issues
 Micro insurance
 Adverse selection and moral hazard
SUCCESS
 For NGO’S
- quick and high ‘customer satisfaction’ is the USP that has attracted
NGOs to this trade.
- For many NGOs the idea of ‘organizing’ – forming a samuha – has
inherent appeal. Groups connote empowerment and organizing women is
a double bonus.

 For Financial institutions and banks


This also seems to sound nice to the government, which in the post
liberalization era is trying to explain the logic of every rupee spent.
That is the reason why microfinance has attracted mainstream
institutions like no other developmental project.
LIMITATION OF THE STUDY

 Non- availability and restricted access to the various confidential


information.
 No proper knowledge of all statistical tools and their use.
 Secondary data collected through website and journal which can be altered
time to time.
CONCLUSION
 A good microfinance program exhibits an attractive combination
of the quality, depth, cost, breadth, length and variety of
outreach.
 Progress in microfinance does allow improvements in one
dimension of outreach without deterioration of another
dimension.
 Indeed there are serious gaps between the current achievements
and potential supply. Reducing the gap between current
achievements and potential supply is the most immediate
challenge for microfinance.
 Expanding the frontier requires more than greater technical
efficiency; it requires innovation. 
REFERENCE
 Anil K Khandelwal, “Microfinance Development Strategy for India”, Economic and
Political Weekly, March 31, 2007
 Raven Smith, “ The Changing Face of Microfinance in India- The costs and benefits of
transforming from an NGO to a NBFC”, 2006
 R Srinivasan and M S Sriram, “Microfinance in India- Discussion”
 Piyush Tiwari and S M Fahad, HDFC, “Concept paper- Microfinance Institutions in
India”
 Report, “Status of Microfinance in India 2006-2007”, NABARD
 Bindu Ananth and Soju Annie George, Microfinancial Services Team of Social
Initiatives Group, ICICI Bank, “Scaling up Microfinancial Services: An overview of
challenges and Opportunities”, August, 2003
 www.google.com
 www.frontiermkts.com/blog/uploaded_images/Products-research-767885.jpg
 www.wikipedia.org
 www.icicibank.com
 www.grameen-info.org/bank
 www.images.google.co.in

You might also like