PRESENTATION ON

ROLE OF BANKS IN MICRO

FINANCING

SUBMITTED TO: PG DEPT. OF

COMMERCE

SUBMITTED BY: NAVDEEP

KAUR
 INTRODUCTION
Microfinance is defined as any activity that include the provision

of financial service such as credit , savings , insurance to low

income individuals which fall just above the nationality 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 .

 MICRO FINANCE
Microfinance is defined as any activity that include the provision
Micro financing
of • financial service issuch
a category of ,financial
as credit savings services targeted
, insurance at
to low
individual and small businesses who lack access to
income individuals which fall just above the nationality that
conventional banking and related services.
poverty line with the goal of creating social
• Micro financing includes microcredit the provision of small
value .the creation of social value includes poverty alleviation and
loans to poor clients ; saving and checking accounts ; micro
the broader impact of improving livelihood opportunities through
insurance, and payment system.
the provision of capital

for micro enterprise ,and insurance and savings for risk mitigation

and consumption smoothing .

 Concept and features of Micro
finance:
• It is tool for empowerment of the poorest .
• Delivery in normally through self help
groups(SHGs).
• It is essentially for promoting self –
employment ,generally used for :
• it is a not just a financing system ,but a tool for
social changes, specially for women.
• Because micro credit is aimed at the poorest ,micro-
 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
 Role of Microfinance
• The micro credit of microfinance programme 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 .
 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.
 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 totals demand for credit
requirements for this part of Indians society is
somewhere around Rs:2,00,000 crores.
 Microfinance changing the face of poor India
• Micro-finance is emerging as a colorful 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 farmer”. “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 year of schooling their

children receive, and improve the health and nutrition of their families.
 SELF HELP GROUPS (SHGs)
• Self help group play today a major role in poverty

alleviation in rural India. A growing number of people

(mostly women in various part of India are member of

self help groups and actively engage in saving and

credit, as well in other activities ( income generation,

natural resources management literacy, child care and

nutrition etc.).
• The saving and credit focus in self help group is the
 BANK PARTNERSHIP MODEL
• This models is an innovative way of financing MFIs.The
bank is a lender and the MFIs acts as an agent for handling
items of work relating to credit monitoring ,supervision and
recovery.
• In other words, the MFI acts as agent and takes Care of all
relationship with the clients , from first contact to final
repayment. The model has the potential to significantly
increase the amount of funding the MFIs can leverage on a
relatively small equity based.
MARKETING OF MICROFINANCE PRODUCTS:-
• Contract farming and credit bunding
• 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 Centre's 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
 Commercial banks as Microfinance vehicles
• Commercial banks recently have stepped into the realm of
microfinance. They have taken tentative but very important steps
towards 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 others important aspects they bring in the professional credit
appraisal practices that are used in their normal operations.
 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 provides 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
 ICICI BANK LAUNCHES NEW
INITIATIVE IN MICRO-FINANCE
• ICICI back has taken a stake of under 20% in financial
information network and operations privative ltd,which was
launched on Thursday,july13,2001.
• 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 should reduce our stake
in the company when required,’’he said.
 MICROFINANACE AND WOMEN
EMPOWERMENT
• Women as micr and small entreprenuers have increasingly
become the key target group for micro finance programme.
Consequntly,providing access to micro finance facility is not only
considered a precondition for poverty alleviation,but also
consider as a strategy for empowering women. in developing
countries like India micro finances playing important role,
providing 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
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,empowement 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
THANK YOU