Documentos de Académico
Documentos de Profesional
Documentos de Cultura
ACKNOWLEDGEMENT
One of the pleasant aspects of preparing a project report is the
opportunity to thank to those who have contributed to make the project
completion possible. I am extremely thankful to Mr. Prathamesh Tawade
my project guide & Mrs. Shruti Charvarkar my course co-ordinator &
Mrs Sangeeta kohli our college principal.
Their active interest in the project and insights helped us formulate,
redefine and implement our approach towards the project I am also
thankful to all those seen and unseen hands & heads, which have been of
direct or indirect, help in the completion of this project study.
SR. NO
1
1.1
1.2
1.3
1.4
2
2.1
2.2
2.3
2.4
2.6
3
TOPIC
ACKNOWLEGEMENT
INTRODUCTION TO THE PROJECT
EXECUTIVE SUMMARY
OBJECTIVE OF THE PROJECT
LIMITATIONS OF THE PROJECT
METHODOLOGY
INTRODUCTION TO MICRO FINANCE
WHAT IS MICRO FINANCE
HISTORY OF MICRO FINANCE
WHAT IS A MICRO FINANCE INSTIUTUION
ADVANTAGE OF MICRO FINANCE
DISADVANTAGE OF MICRO FINANCE
LEGAL RULES & REGULATIONS FOR MICRO FINANCE IN
INDIA
TYPES OF MICRO FINANCE MODELS & ORGANIZATION
PAGE
NO
2
5-8
5
6
7
8
11-28
11
15
18
20
21
23
28-38
4.1
IN INDIA
MICRO FINANCE MODELS IN INDIA
4.2
37
40
5.1
40
5.2
41
5.3
INVESTMENT PARTNERS
42
5.4
5.5
5.6
5.7
BOARD OF DIRECTORS
MICRO-FINANCE BUSINESS MODEL
METHODOLOGY OF LENDING LOANS
PRODUCTS & SERVICES
OPERATIONAL & FINANCIAL PERFORMANCE OF SKS
43
46
48
50
6
7
7.1
MICRO FINANCE
RECOMMENDATIONS & CONCLUSION
RECOMMENDATION FOR MICRO FINANCE
3
28
53-61
63-68
63
7.2
8
CONCLUSION
BIBLOGRAPHY
INTRODUCTION
TO
THE
4
66
69
PROJECT
EXECUTIVE SUMMARY
Microfinance is defined as an activity that includes the provision of financial services such as
credit, savings, and insurance to low income individuals, the activity done by micro finance is
same activities which are carried on by the commercial bank, for the common people. Micro
finance is a new concept in India & this concept is not widely used due to certain limitations like
regulations by NABARD & RBI.
In India the people who live below the poverty line cannot access banks for the purposes like
savings or borrowing loans. To give same facilities which are provided by commercial bank
5
Micro finance institution came to existence which give same services to poor people which are
provided by commercial banks.
The services provided by Microfinance Institution are like as follows:
1
2
3
4
Micro credit
Micro leasing
Micro savings
Money transfer
As India is the only country who has most of the population below the poverty line Micro
finance becomes essential as the main motive for the existence of micro finance is to eliminate
poverty & to increase the standard of living of the people. Micro finance in India can be used as
an important tool which can help to eradicate poverty in India & increase the standard of living
of people.
The need of Micro finance in India is due to the following reasons
Due to this above reason Micro finance is suitable in India as micro finance institutions give
loans to poor people without collateral & the size of loan is $100 given by the micro finance
institution.
attitude
is
very
secretive
about
their
investments.
finance institutions that are registered under RBI are to be included in the
study.
METHODOLOGY OF DATA
The data of this project has been collected from various internet websites like Wikipedia &
various newspaper articles like Times of India, & also from the books like All About Micro
finance & Micro finance & women empowerment.
INTRODUCTION
TO
MICRO-FINANCE
10
What is Micro-Finance?
The dictionary meaning of finance is management of money. The management of money
denotes acquiring & using money. Micro Finance is buzzing word, used when financing for
micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to
empower under-privileged class of society, women, and poor, downtrodden by natural reasons or
men made; caste, creed, religion or otherwise.
The principles of Micro Finance are founded on the philosophy of cooperation and its central
values of equality, equity and mutual self-help. At the heart of these principles are the concept of
human development and the brotherhood of man expressed through people working together to
achieve a better life for themselves and their children.
Traditionally micro finance was focused on providing a very standardized credit product. The
poor, just like anyone else, (in fact need like thirst) need a diverse range of financial instruments
to be able to build assets, stabilize consumption and protect themselves against risks. Thus, we
see a broadening of the concept of micro finance--- our current challenge is to find efficient and
reliable ways of providing a richer menu of micro finance products.
Micro Finance is not merely extending credit, but extending credit to those who require most for
their and familys survival. It cannot be measured in term of quantity, but due weightage to
quality measurement.
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.
11
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. A large variety of sectors provide
microfinance in India, using a range of microfinance delivery methods.
Microfinance is the supply of loans, savings and other financial services to the poor. The term
micro is in reference to the small amounts typically involved in the practice. These services are
small micro because a person who does not have a lot of money most likely will not need a
loan of several thousand dollars.
However, a loan of a few hundred dollars may make a huge difference in their lives, giving them
the ability to purchase livestock for a small farm, a sewing machine to help make accessories and
clothes, or supplies for a small store.
Microfinance is a source of financial services for entrepreneurs and small businesses lacking
access to banking and related services. The two main mechanisms for the delivery of financial
services to such clients are: (1) relationship-based banking for individual entrepreneurs and small
businesses; and (2) group-based models, where several entrepreneurs come together to apply for
loans and other services as a group.
For some, microfinance is a movement whose object is "a world in which as many poor and
near-poor households as possible have permanent access to an appropriate range of high quality
financial services, including not just credit but also savings, insurance, and fund transfers. Many
of those who promote microfinance generally believe that such access will help poor people out
of poverty
The goal of microfinance was the alleviation of poverty. For many years, microfinance had this
primary social objective and so traditional MFIs consisted only of non-governmental
organizations (NGO), specialized microfinance banks and public sector banks. More recently, the
marketplace has been evolving.
12
Since the ICICI Bank in India, various actors have endeavoured to provide access to financial
services to the poor in creative ways. Governments also have piloted national programs, NGOs
have undertaken the activity of raising donor funds for on-lending, and some banks have
partnered with public organizations or made small inroads themselves in providing such services.
This has resulted in a rather broad definition of microfinance as any activity. The main objective
of micro- finance is to give small loans to people for their business start-up without any collateral
or other security. Micro- finance has helped to eradicate poverty in many developed countries
like Bangladesh where Grameen Bank has offered credit to hierarch of people formerly
underserved: women, the poor, unemployed and illiterate people.
Access to credit is based on reasonable terms, example as the group lending system and weeklyinstalment payments, with reasonably long terms of personal loans, enable the poor to build on
their skills to earn higher income in each cycle of personal loans.
The main objective of micro- finance is to promote financial independence among the poor.
Micro- finance encourages all borrowers to become savers, so that their capital will be converted
into new loans to others. Micro- finance targets the poorest of the poor, with a particular
emphasis on women. They receive 95% of the Grameen banks loans.
They had less access to financial alternatives of incomes and ordinary credit lines. Women
traditionally were seen to have an inequitable share of power in household decision making
Micro- finance have found that lending to women generates good effects, including
empowerment of a marginalized segment of society.
13
RURAL
DEVELOPMENT
LITERACY
ENTREPRENEUR
MICRO FINANCE
EMPOWERMEN
T
POVERTY
ELIMINATION
HIGHER
STANDARD OF
LIVING
RISE IN RURAL
DEMAND
EMPLOYMENT
14
History of Micro-Finance
The concept of microfinance is not new. Savings and credit groups that have operated for
centuries include the "susus" of Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in
Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa, and "pasanaku" in Bolivia, as well as
numerous savings clubs and burial societies found all over the world.
Formal credit and savings institutions for the poor have also been around for decades, providing
customers who were traditionally neglected by commercial banks a way to obtain financial
services through cooperatives and development finance institutions.
One of the earlier and longer-lived micro credit organizations providing small loans to rural poor
with no collateral was the Irish Loan Fund system, initiated in the early 1700s by the author and
nationalist Jonathan Swift. Swift's idea began slowly but by the 1840s had become a widespread
institution of about 300 funds all over Ireland. Their principal purpose was making small loans
with interest for short periods. At their peak they were making loans to 20% of all Irish
households annually.
In the 1800s, various types of larger and more formal savings and credit institutions began to
emerge in Europe, organized primarily among the rural and urban poor. These institutions were
known as People's Banks, Credit Unions, and Savings and Credit Co-operatives. N Indonesia, the
Indonesian People's Credit Banks (BPR) or The Bank Perkreditan Rakyat opened in 1895.
The BPR became the largest microfinance system in Indonesia with close to 9,000 units. In the
early 1900s, various adaptations of these models began to appear in parts of rural Latin America.
While the goal of such rural finance interventions was usually defined in terms of modernizing
the agricultural sector, they usually had two specific objectives: increased commercialization of
the rural sector, by mobilizing "idle" savings and increasing investment through credit, and
reducing oppressive feudal relations that were enforced through indebtedness.
15
In most cases, these new banks for the poor were not owned by the poor themselves, as they had
been in Europe, but by government agencies or private banks. Over the years, these institutions
became inefficient and at times, abusive.
Between the 1950s and 1970s, governments and donors focused on providing agricultural credit
to small and marginal farmers, in hopes of raising productivity and incomes. These efforts to
expand access to agricultural credit emphasized supply-led government interventions in the form
of targeted credit through state-owned development finance institutions, or farmers' cooperatives
in some cases, that received concessional loans and on-lent to customers at below-market interest
rates.
These subsidized schemes were rarely successful. Rural development banks suffered massive
erosion of their capital base due to subsidized lending rates and poor repayment discipline and
the funds did not always reach the poor, often ending up concentrated in the hands of better-off
farmers.
The history of micro-financing can be traced back as long to the middle of the 1800s when the
theorist Lysander Spooner was writing over the benefits from small credits to entrepreneurs and
farmers as a way getting the people out of poverty. But it was at the end of World War II with the
Marshall plan the concept had a big impact.
The today use of the expression micro-financing has its roots in the 1970s when organizations,
such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus, where
starting and shaping the modern industry of micro-financing.
Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of microfinance
initiatives introduced many new innovations into the sector. Many pioneering enterprises began
experimenting with loaning to the underserved people.
The main reason why microfinance is dated to the 1970s is that the programs could show that
people can be relied on to repay their loans and that its possible to provide financial services to
16
poor people through market based enterprises without subsidy. Shore bank was the first
microfinance and community development bank founded 1974 in Chicago.
An economical historian at Yale named Timothy Guinnane has been doing some research on
Friedrich Wilhelm Raiffeisens village bank movement in Germany which started in 1864 and by
the year 1901 the bank had reached 2million rural farmers. Timothy Guinnane means that
already then it was proved that microcredit could pass the two tests concerning peoples payback
moral and the possibility to provide the financial service to poor people.
Another organization, the caisse populaire movement grounded by Alphone and Dorimne
Desjardins in Quebec was also concerned about the poverty, and passed those two tests between
1900 to 1906 when they founded the first caisse they passed a law governing them in the Quebec
assembly, they risked their private assets and must have been very sure about the idea about
microcredit.
Today the World Bank estimates that more than 16 million people are served by some 7000
microfinance institutions all over the world. CGAP experts means that about 500 million families
benefits from these small loans making new business possible. In a gathering at a Microcredit
Summit in Washington DC the goal was reaching 100 million of the worlds poorest people by
credits from the world leaders and major financial institutions.
Historical context can help explain how specialized MFIs developed over the last few decades.
Between the 1950s and 1970s, governments and donors focused on providing subsidized
agricultural credit to small and marginal farmers, in hopes of raising productivity and incomes.
During the 1980s, micro-enterprise credit concentrated on providing loans to poor women to
invest in tiny businesses, enabling them to accumulate assets and raise household income and
welfare. These experiments resulted in the emergence of nongovernmental organizations (NGOs)
that provided financial services for the poor.
17
MICRO
CREDIT
MICRO
INSURAN
CE
MICRO
LEASING
MICRO FINANCE
MONEY
TRANSFE
R
INSTITUTION
MCRO
SAVINGS
18
Disadvantage of Micro-Finance
20
1. Financial illiteracyOne of the major hindrances in the growth of the microfinance sector is the financial illiteracy of
the people. This makes it difficult in creating awareness of microfinance and even more difficult
to serve them as microfinance clients. Though most of the microfinance institutions claim to
have educational trainings and programmers for the benefit of the people, according to some of
the experts the first thing these SHG and JLG members are taught is to do their own signature.
The worst part is that many MFIs think that this is what financial literacy means. We all know
how dangerous it can be when one doesnt know how to read but he/she knows how to accept or
approve it (by signing it).
2. Inability to generate sufficient fundsInability of MFIs to raise sufficient fund remains one of the important concern in the
microfinance sector. Though NBFCs are able to raise funds through private equity investments
because of the for-profit motive, such MFIs are restricted from taking public deposits. Not-forprofit companies which constitute a major chunk of the MFI sector have to primarily rely on
donations and grants from Government and apex institutions like NABARD and SIDBI. In
absence of adequate funding from the equity market, the major source of funds for MFIs are the
bank loans, which is the reason for high Debt to Equity ratio of most MFIs.
3. Dropouts and Migration of group membersMajority of the microfinance loans are disbursed on group lending concept and a past record of
the group plays an important role in getting new loans either through SHG-Bank linkage or
through MFIs. The two major problems with the group concept are dropouts and migration.
4. Interest Rates-
21
One of the principal challenges of microfinance is providing small loans at an affordable cost.
The global average interest and fee rate is estimated at 37%, with rates reaching as high as 70%
in some markets. The reason for the high interest rates is not primarily cost of capital. Indeed, the
local microfinance organizations that receive zero-interest loan capital from the online micro
lending platform. The high costs of traditional microfinance loans limit their effectiveness as a
poverty-fighting tool.
5. Use of Loans
Practitioners and donors from the charitable side of microfinance frequently argue for restricting
micro credit to loans for productive purposessuch as to start or expand a micro enterprise.
Those from the private-sector side respond that because money is fungible, such a restriction is
impossible to enforce, and that in any case it should not be up to rich people to determine how
poor people use their money.
6. Lack of Capacity to PromoteAfter a group has been promoted, continuous efforts are needed to monitor these groups and
strengthen their internal capacity to undertake administrative tasks (accounting, meeting minutes,
correspondence, and negotiations with bankers) and commercial activities (business start-ups,
marketing, and reinvestment.
7. Regulatory ReasonsDue to regulatory reasons, only a handful of microfinance institutions (MFIs) were able in
promoting mutual savings among groups and a few NGO MFIs offer savings services by taking
deposits from their members. Others have had to use mutual benefit trusts or mutually aided
cooperative societies (MACS). Only the SEWA Bank, Ahmedabad and the BASIX local area
bank KBSLAB (in three districts of AP and Karnataka) offer savings as RBI regulated entities.
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.
NBFCs are registered under the Companies Act, 1956 and are governed under the RBI Act.
There is no specific law catering to NGOs although they can be registered under the Societies
Registration Act, 1860, the Indian Trust Act, 1882, or the relevant state acts.
There has been a strong reliance on self-regulation for NGO MFIs and as this applies to NGO
MFIs mobilizing deposits from clients who also borrow. This tendency is a concern due to
enforcement problems that tend to arise with self-regulatory organizations.
In January 2000, the RBI essentially created a new legal form for providing microfinance
services for NBFCs registered under the Companies Act so that they are not subject to any
capital or liquidity requirements if they do not go into the deposit taking business. Absence of
liquidity requirements is concern to the safety of the sector.
The Reserve Bank of India has now decided to bunch together the beleaguered microfinance
sector as a niche segment within the category of non-banking financial companies (NBFC).
This means it will now be the direct regulator of this sector in line with the recommendations
of the Malegam Committee which made recommendations in this regard after the Andhra
microfinance fiasco.
Under guidelines issued on Friday, the RBI has directed all existing microfinance institutions
(MFIs) who can meet its new regulatory norms to register as NBFC-MFIs by April 2012. Those
who do not meet the norms cannot, henceforth, lend more than 10 percent of their total assets to
the sector.
They must have minimum net owned funds of Rs.5 crores (Rs.2 crores if they operate in the
North-East).
Their capital adequacy ratio (CAR) has to be 15 percent. This ratio is the measure of a banks
capital weighed against its risk assets (loans). Since MFIs in Andhra are stuck up to their necks
in bad debts, the RBI has given them a one-year concession in capital adequacy. MFIs with more
than 25 percent exposure to Andhra Pradesh need to maintain only 12 percent CAR in the first
year.
MFIs cannot lend at more than 26 percent interest, and margins on borrowed funds cannot
exceed 12 percent. This means if MFIs can borrow cheap say at 10 percent the interest rate
cap on lending is 22 percent, and not 26 percent.
As far as lending is concerned, not more than two MFIs can lend to the same borrower while one
borrower cannot be a member of two groups simultaneously. The frequency of repayment
instalments can be decided by the borrower. MFIs should have higher cut-offs for lending in
urban and semi-urban areas. MFIs have to start provisioning for defaults, and loans that are not
serviced for more than 90 days should be classified as non-performing.
A microfinance institution under the Microfinance Institutions (Development and Regulation)
Bill, 2012 includes the following entities:
A trust established under any law for the time being in force;
24
Category
Type of MFIs
Estimated
Number
Registered
Societies Registration Act,
400 to 500
MFIs
b.) Non-profit
Section 25 of the
Companies
10
Societies (MACS)
MFIs
Mutually Aided
Cooperative
institutions
enacted by State
Government
a.) Non-Banking
3. For Profit MFIs
Financial Companies 50
(NBFCs)
1956
Reserve Bank of India Act,
1934
NBFC-MFI
25
Total
700 to 800
fashion: the issue of dual regulation, and specifically, whether RBI in specified priority sectors at
concessional rates of interest. Currently only MFIs registered as NBFCMFIs are designated as a
priority sector. The number of priority sectors has recently been reduced, which suggests that
banks will be relying more heavily on. Lending to MFIs to meet the priority sector requirements.
In order to register as a NBFC-MFI, an institution must meet requirements specified by RBI.
RBI requires that a minimum of 75 percent of a NBFCMFIs loan portfolio must have originated
for income-generating activities. Additionally, an NBFCMFI must have 85 percent of its total
assets as qualifying assets (excluding cash, balances with banks and financial institutions,
government securities and money market instruments). A qualifying asset is a loan which meets
the following criteria:
1. Borrowers household annual income does not exceed Rs60, 000 or Rs1, 20,000 for rural and
urban areas respectively.
2. Maximum loan size of Rs35, 000 (first cycle) and Rs50, 000 (subsequent cycles).
3. Maximum borrower total indebtedness of Rs50, 000
4. Minimum tenure of 24 months when loan exceeds Rs15, 000.
5. No prepayment penalties.
6. No collateral.
7. Repayable by weekly, fortnightly or monthly instalments at the choice of the borrower.
27
TYPES
OF
MICRO-FINANCE
MODELS
&
ORGANIZATION
IN
28
INDIA
29
Bank
MFI
CLIE
NT
In this diagram we see that a MFI acts as anas 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 30
relationships with the client, from first
contact to final repayment
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.
If the MFI fulfils the true sale criteria, the exposure of the bank is treated as being to the
individual borrower and the prudential exposure norms do not then inhibit such funding of MFIs
by commercial banks through the securitization structure.
BANK
MFI
CLIENT
31
CLIENT CLIENT
3.
BANK
c
e
Branches
of bank
CLIENTS
Company Model
Branches
of bank
CLIENT
S
32
CLIENT
S
Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works hand in
hand with that MFI to extend loans and other services. On paper, the model is similar to the
partnership model: the MFI originates the loans and the bank books them. But in fact, this model
has two very different and interesting operational features:
The MFI uses the branch network of the bank as its outlets to reach clients. This allows the
client to be reached at lower cost than in the case of a standalone MFI. In case of banks which
have large branch networks, it also allows rapid scale up.
In the partnership model, MFIs may contract with many banks in an arms length relationship. In
the service company model, the MFI works specifically for the bank and develops an intensive
operational cooperation between them to their mutual advantage.
The Partnership model uses both the financial and infrastructure strength of the bank to create
lower cost and faster growth. The Service Company Model has the potential to take the burden of
overseeing microfinance operations off the management of the bank and put it in the hands of
MFI managers
This manager is focused on microfinance to introduce additional products, such as individual
loans for SHG graduates, remittances and so on without disrupting bank operations and provide a
more advantageous cost structure for microfinance.
33
Bank
MFI
SHG
CLIENT
CLIENT
34
CLIENT
The bank led model was derived from the SHG-Bank linkage program of NABARD. Through
this program, banks financed Self Help Groups (SHGs) which had been promoted by NGOs and
government agencies. ICICI Bank drew up aggressive plans to penetrate rural areas through its
SHG program.
However, rather than spending time in developing rural infrastructure of its own, in 2000, ICICI
Bank announced merger of Bank of Madura (BoM), which had significant presence in the rural
areas of South India, especially Tamil Nadu, with a customer base of 1.9 million and 87
branches.
Bank of Madura's SHG development program was initiated in 1995. Through this program, it
had formed, trained and initiated small groups of women to undertake financial activities like
banking, saving and lending. By 2000, it had created around 1200 SHGs across Tamil Nadu and
provided credit to them.
35
27
5. Partnership Models
Loan at 9%
BANK
JLG
GROUP
MFI
FLDG of
Servicin
10%
g fees
Interest
of 11%
charged
: 20%
on-lends to clients; few MFIs have been able to grow beyond a certain
point. Under this model, MFIs are unable to provide risk capital in large quantities, which limits
the advances from banks.
36
In addition, the risk is being entirely borne by the MFI, which limits its risk-taking. This model
aimed at synergizing the comparative advantages and financial strength of the bank with social
intermediation, mobilization power and infrastructure of MFIs and NGOs.
Through this model, ICICI Bank could save on the initial costs of developing rural infrastructure
and micro credit distribution channels and could take advantage of the expertise of these
institutions in rural areas.
Initially, ICICI Bank started off by lending to MFIs and NGOs in order to provide the necessary
financial support to their activities. Later, ICICI Bank came up with a plan where the NGO/MFI
continued to promote their microfinance schemes, while the bank met the financial requirements
of the borrowers.
37
1. Formal Sector
The formal sector comprises of the banks such as NABARD, SIDBI and other regional rural
banks (RRBs). They primarily provide credit for assistance in agriculture and micro-enterprise
development and primarily target the poor.
Their deposit at around Rs.350 billion and of that, around Rs.250 billion has been given as
advances. They charge an interest of 12-13.5% but if we include the transaction costs (number of
visits to banks, compulsory savings and costs incurred for payments to animators/staff/local
leaders etc.) they come out to be as high as 21-24%.
38
I. Organizations which directly lend to specific target groups and are carrying out all related
activities like recovery, monitoring, follow-up etc.
II. Organizations who only promote and provide linkages to SHGs and are not directly involved
in micro lending operations.
III. Organizations which are dealing with SHGs and plan to start micro-finance related activities.
B.Informal Sector
In addition to friends and family, moneylenders, landlords, and traders constitute the informal
sector. While estimates of their importance vary significantly, it is undeniable that they continue
to play a significant role in the financial lives of the poor. These are the organizations that
provide support to implementing organizations.
The support may be in terms of resources or training for capacity building, counselling,
networking, etc. They operate at state/regional or national level. They may or may not be directly
involved in micro-finance activities adopted by the associations/collectives to support
implementing Organizations.
39
40
41
42
Shareholders
Percentage
Kismet Microfinance
3,377,333
2.66%
3,377,333
2.66%
IDFC*
Morgan Stanley Asia (Singapore) Pte.
6,924,786
5,829,100
5.45%
4.59%
5,506,193
4.33%
5,159,502
4.06%
4,400,887
3.46%
4,238,866
3.34%
3,545,897
2.79%
2,850,000
2.24%
Kismet SKS II
2,461,578
1.94%
2,357,076
1.85%
DSP BlackRock*
2,170,506
1.71%
2,056,691
1.62%
2,000,000
1.57%
ICICI Prudential*
1,819,701
1.43%
1,607,765
1.27%
1,492,924
1.17%
1,479,895
1.16%
1,475,961
1.16%
1,364,702
1.07%
LTD
Sub Total
58,742,030
46.21%
(ii) Others
64,974,430
51.12%
123,716,460
97.33%
0.00%
127,093,793
100%
44
special situations, midcaps and complex opportunities. Sandstone Capital has an office in Boston. Prior to
Sandstone Capital LLC, Paresh Patel was the Managing Director of Sparta Group, the private investment
office of Gururaj Deshpande, founder of Sycamore Networks. At Sparta, Paresh invested with Desh in
early-stage ventures in the US and India - including A123 Systems, Indian Lotus, Relicore and Tejas
Networks. Paresh is a graduate of Harvard Business School and Boston College.
Mr.K.G. Alai, Chief General Manager, Small Industries Development Bank of India (SIDBI),
45
Sumir Chadha is the Managing Director with West Bridge Formerly Sequoia Capital.
West Bridge Formerly Sequoia Capital was formed by merging Sequoia Capital and West
Bridge Capital Partners, India's leading venture capital fund, which Sumir co-founded in
2000. Sumir has been investing in the Indian venture capital industry for the past ten
years in several industries including offshore services, consumer internet and financial
services. Prior to co-founding West Bridge, Sumir was a member of the Principal
Investment Area at Goldman Sachs & Co., where he led a number of successful software
and services investments. Sumir is the co-founder and Chairman of the Global India
Venture Capital Association (GIVCA) and also a Charter Member of the Indus
Entrepreneurs (TiE).
46
47
GROUP
FORMATIO
N
Sangam
Formation
&
Borrowing
Sangam
Size
Increases
Member
invests in
enterprise
s
Repaymen
t of Loans
48
SKS micro finance uses Joint Liability Group model as their business model Joint
Liability Group is a concept established in India in 2014 by the rural development
agency National Bank for Agriculture and Rural Development (NABARD) to
provide institutional credit to small farmers. JLG was pioneered by Grameen Bank
Joint Liability Group is a group of 4-10 people of same village/locality of
homogenous nature and of same Socio Economic Background who mutually come
together to form a group for the purpose of availing loan from a bank without any
collateral Pioneered by Grameen BankLending to individual women, utilizing five
member groups where groups serve as the ultimate guarantor for each
memberHigh Repayment Ratio of 98% Because of Social Pressure
Purpose of JLG
Providing Credit to Small and Marginal Farmers, Tenant Farmers, Oral Lessee,
Landless Laborers and Artisans
Providing Collateral Free Loan to Groups
Building Confidence between Groups and Banks
To mitigate the credit risk by way of group dynamics, peer pressure, credit
discipline and cluster approach.
To provide self-employment and increase production of agricultural
products.
Lending to individual women, utilizing five member groups where groups
serve as the ultimate guarantor for each member
High Repayment Ratio of 98% Because of Social Pressure
Features of JLGs
Members should have a common activity.
Members need not to have a land title.
Members should be of the same village.
49
50
Village Selection
Before starting operations, our staff conduct village surveys to evaluate local conditions like
population, poverty level, road accessibility, political stability and means of livelihood.
Projection Meeting
After a village is selected, SKS staff introduces the community to its mission, methodology and
services.
51
Group Formation
Women form self-selected five-member groups to serve as guarantors for each other. Experience
has shown that a five-member group is small enough to effectively enforce group peer pressure
and, if necessary, large enough to cover repayments in case a member needs assistance.
Centre Meeting
As additional groups are formed within a single village, a Centre (sangam) emerges. During
Centre Formation, groups are combined to form a centre of 3 to 10 groups or 15 to 50 members.
Weekly Centre meetings serve as a time to conduct financial transactions. Meetings are held
early in the morning, so as to not interfere with clients daily activities.
A leader and deputy leader are selected to facilitate meetings and ensure compliance with SKS
procedures. In addition to financial transactions, members use the weekly meetings to discuss
new loan applications and community issues. Centre meetings are conducted with rigid
discipline in order to sustain the environment of credit discipline created during CGT.
.
52
53
3. Mobile Loans:
54
Loan amount ranges from Rs. 1,799 to Rs. 5,290. Loan tenure is 25 weeks Annualized Interest
rate ranges from 19.60 % to 19.70% depending on the product.
Benefits of Mobile loan - Loans are offered to members for purchase of products like cookstove/ solar light/ water purifier/ mobile phone/ bicycle and sewing machine to enhance their
productivity and income generation ability
4. Housing Loans:
SKS micro finance provides housing loans to their clients the loan amount range from Rs.
50,000 to Rs. 150,000 the interest rates are 11.9%
5. Funeral Assistance:
funeral assistance of Rs.1000 is applicable only for members who have paid insurance
premium, and is provided to family of the member if information is received within 14 days
death.
6. Gold loan
Gold Loan pilot launched under the name of Swarnapushpam provide personal/business loans
to our members for meeting their short-term liquidity requirements loans secured by gold
jewellery ranging from Rs.2000 to Rs.1,00,000 extended to 40 branches across states of
Karnataka, Maharashtra and UP gold Loan portfolio stood at Rs 55.9 crore, representing 2.4% of
total outstanding loan portfolio at the end of FY13
55
OPERATIONAL
&
FINANCIAL
PERFORMANCE
OF
SKS MICRO FINANCE
56
Operational
information
FY14
FY13
FY12
FY11
FY10
FY09
Total no. of
Branches
1,255
1,261
1,461
2,379
2,029
1,353
Total no. of
Districts
294
298
329
378
341
307
10,809
16,194
22,733
21,154
12,814
Total No. of
Members (in
'000)
5,783
5,021
5,351
7,307
6,780
3,953
Amount
Disbursed for the
4,788
period (INR
crores)
3,320
2,737
7,831
7,618
4,485
Portfolio
outstanding (INR 3,113
crores) *
2,359
1,669
4,111
4,321
2,456
Centres
States covered
15
15
18
19
19
18
Loan Officers
1,100
744
517
477
571
498
4,3088
4,257
6,242
5,795
3,521
Active borrowers
4,963
(in 000)
57
9,000
8,000
7,831
7,000
7,618
6,000
5,000
Amount in Crores
4,000
4,485
4,485
3,320
3,000
2,737
2,000
1,000
0
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15
Financial year
59
1270
1200
1000
958
800
Amount inColumn2
Crores
Linear (Column2)
Linear (Column2)
600
554
545
472
400
353
200
FY 10
FY 11
FY 12
FY 13
FY 14
Financial Year
60
FY 15
2014 the revenue decreased to Rs 353 crores but in financial year 2015 the
revenue of SKS micro finance gained up to Rs 545 crores
Linear (Networth)
Linear (Networth)
2000
1800
1781
1600
1400
1200
Amount In Crores
1000
950
800
600
665
400
435
459
390
200
0
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15
Financial Year
but in financial year 2013 the net worth of SKS micro finance shrinked to Rs
435 crores in financial year 2014 the net worth declined to Rs 390 crores but
in financial year 2015 the net worth increase to Rs 459 crores.
Borrowers(In million)
45
40
42
41
35
30
30
25
24
20
17
15
10
5
4.4
0
FY 11
2.6
FY 13
2.5
FY 12
3.6
3.3
FY 14
FY 15
Financial Year
Financial Institution
NBFC
Securitisation
70
60
50
40
In Percentage
64
30
20
10
0
44
61
58
38
48
47
44
41
35
23
16
12
2
FY 10
2
FY 11
23
8
1
FY 12
7
0
FY 13
3
FY 14
7 9
FY 15
Financial Year
63
In financial year 2011the funding by bank was increased up to 64% but the
funding of Financial institution was decreased up to 12% the funds funded by
NBFC companies were at constant level of 2% & the funds which were
raised through securitisation were decreased up to 23% respectively.
In financial year 2012 the funds funded by bank were declined up to 44%
also the funds which were funded by financial institution were decreased up
to 8% & the funding of NBFC was declined up to 1% but the funds raised
through securitisation showed a boost up to 47% respectively.
In financial year 2013 the funding of funds by banks increased up to 58% but
the funding of financial institutions was declined up to 7% & there was no
funding from NBFC companies & the funds raised through securitisation
were declined up to 38% respectively.
In financial year 2014 the funding by banks was declined up to 48% the
funds funded by financial institutions raised up to 8% the funds funded by
NBFC showed a boost up to 3% & the funds raised through securitisations
showed an increase up to 43% respectively.
In financial year 2015 the funding of banks was boosted up to 61% but the
funding of financial institution was declined up to 7% but the funding of
64
NO. OF SHARES
PERCENTAGE
DIRECTORS
FOREIGN INSTITUTIONS
NBFC AND MUTUAL FUNDS
OTHERS
GENERAL PUBLIC
OTHER COMPANIES
FOREIGN PROMOTERS
FOREIGN - NRI
FINANCIAL INSTITUTIONS
358,666
60,582,946
19,596,904
11,340,546
10,455,287
9,389,105
7,995,231
5,485,068
1,550,338
0.28%
47.80%
15.46%
8.95%
8.25%
7.41%
6.31%
4.33%
1.22%
358,666
1,550,338
5,485,068
7,995,231
9,389,105
10,455,287
60,582,946
11,340,546
19,596,904
Directors
Foreign Institutions
NBFC
Others
General Public
Other Companies
Foreign Promoters
NRI
Financial Institutions
LOANS
PORTFOLIO SALES
BONDS
COMMERCIAL PAPER
LOANS; 56%
LOANS
56%
PORTFOLIO SALES
34%
BONDS
3%
COMMERCIAL PAPER
4%
OTHERS
3%
66
OTHERS
RECOMMENDATIONS
&
CONCLUSION
67
68
69
70
CONCLUSION
SKS Microfinance Limited (SKS) is the countrys leading listed microfinance
player in India providing credit to over 6.4 million poor people through its network
of 1268 branches spread across several states. Its core business is to provide smallticket loans, primarily to women borrowers who are generally outside the financial
system, under the joint liability group. It also provides other basic financial
services to its target segment.
SKS is primarily engaged in providing microfinance to lowincome individuals in
India. SKS Microfinances core business is providing small value loans and certain
other basic financial services to its members (customers), who are predominantly
located in rural areas in India. These members use SKS loans mainly for small
businesses or for other incomegenerating activities; they are not usually used for
personal consumption. These individuals often have no access (or very limited
access) to loans from institutional sources of financing. In its core business, SKS
uses a villagecentered, grouplending model to provide unsecured loans to its
members.
Under its jointliability grouplending model, SKS lends solely to women
borrowers (similar to the Grameen Bank model) in this model, women
guarantee each others loans. There are three reasons why SKS lends only to
women:
1) Women tend to use resources more productively than men
2) They are more likely to invest most of their income back into the household
3) They are more likely to avoid risky ventures and instead use loans to undertake
small, manageable activities.
71
72
Risks
Microfinance (being a sensitive subject) will always be subjected to political
risk.
Events such as natural calamities can hurt asset quality, with high write-offs.
Regulatory risk, i.e., if RBI announces measures that negatively affect growth
or profitability.
High attrition in the field officer segment, which may impact business growth
and reduce productivity.
Around 84% funds is sourced from banks (including 23% from securitization).
Any disruption in flow of funds could
impact the business growth.
High lending interest rates
From above points we can conclude that SKS micro finance is an expanding
company in the sector of micro finance & if the company follows
recommendations by experts the company can gain achieve growth & increase its
user client base thus making it one of the leading companies in the sector of micro
finance in India.
73
BIBLOGRAPHY
74
http://www.sksindia.com/our_approach.php
http://www.careratings.com/upload/CompanyFiles/PR/SKS MICROFINANCE
LIMITED-04-06-2015.pdf
http://timesofindia.indiatimes.com/business/india-business/SKS-Microfinance-cuts-1200jobs-in-Andhra-Pradesh/articleshow/13083157.cms
http://www.sksindia.com/our_products.php - 1
http://www.sksindia.com/methodology.php
https://www.sksindia.com/know_sks.php
http://www.moneycontrol.com/india/stockpricequote/finance-
general/sksmicrofinance/SM11
http://in.reuters.com/finance/stocks/companyProfile?
symbol=SKSM.BOhttp://profit.ndtv.com/stock/sks-microfinance-ltd_sksmicro/news
http://economictimes.indiatimes.com/sks-microfinance-ltd/stocks/companyid-30587.cms
http://www.firstpost.com/tag/sks-microfinance
http://www.dnaindia.com/topic/sks-microfinance
http://www.thehindubusinessline.com/companies/tag/SKS-Microfinance-Limited/62777/
http://www.livemint.com/Companies/89OXZ10u2UU7gs1fWylSKN/SKS-Microfinance-
Q3-net-jumps-93-at-Rs79-core.html
75