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Poverty Lending Approach: It concentrates on reducing poverty through credit often provided with complementary services like skill training, literacy development, providing health, nutrition and other benefits.Its goal is to reach as much as poor people as possible and especially extremely poor people. Financial System Approach: It
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MFI in India
MFI are the institutions that provide the micro finance facilities. The range of institutions providing micro credit could be classified into following three categories:
1.
1.
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Informal Institutions
Chit Fundsa Finance corporations Hire purchase Firms Nidhis Wholesalers and other Intermediaries Arartiyas or commission agent Indigenous bankers Brokers Pawn Brokers
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Formal Institutions
Commercial Banks NABARD Regional rural banks Local area Banks Co-operative Banks Industrial Bank of India Small Industries Development bank of India 7/22/12
Cont.
Semi-formal Institutions: Tese institutions undertake both thrift and credit as their main activity . Further few of the NGOs engaged in activities relating to community mobilization for their socio-economic development have initiated savings and credit programs for their target groups. These community worked on two models:
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In the past few years, savings-led microfinance has gained recognition as an effective way to bring very poor families low-cost financial services. For example, in India, the National Bank for Agriculture and Rural D (NABARD) finances more than 500 banks that on-lend funds to self-help groups(SHGs). SHGs comprise twenty or fewer members, of whom the majority are women from the poorestcastesand tribes. Members save small amounts of 7/22/12 money, as little as a few rupees a
Not-For-Profit Entitiesare trusts, societies and section 25 companies. For-Profit enterprisesare NonBanking Financial Companies (NBFCs).
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Cont.
(i) Reserve Bank of IndiaAct, 1934: TheReserve Bank of India Act 1934 establishes the central bank (Banking Regulatory Authority of India). It is of interest to the question of the regulation of microfinance in that under a 1977 Amendment it contains provisions for the establishment and operations of non-bank finance companies 7/22/12
Cont.
(ii) Banking Regulation Act 1949 The Banking Regulation Act 1949 covers banking companies. It does not apply to primary agriculture credit societies, cooperative land mortgage banks and any other cooperative society. It is not directly relevant to micro-finance, other than the fact that it coves local area banks and commercial banks, which are involved in linkage operations. The Banking Regulation Act provides the 7/22/12 basis for the licensing of local area
Cont.
Co-operative Societies Act of 1904; Mutually Aided Cooperative Societies Act in 1995 (Andhra Pradesh)Societies Registration Act of 1860 and Indian Trusts Act -1882: The term cooperative covers a range of institutions, both formal (statedowned cooperatives banks) and semi-formal (cooperative societies), which are regulated and/or 7/22/12 unregulated. Enterprises registered
2. 3.
Acting for building mutual trust and confidence between poor and 7/22/12
Cont. In the third model bank finance SHG through NGO and other financial intermediaries for further lending's. Federation of SHGs, NBFc, MCIs, MFIs act as a financial intermediaries. The repayment responsibility fall to NGO ar SHG. Tier-II NGO Some NGOs have taken up financing the SHGs or individual directly to ensure easy credit access to poor. 7/22/12 These NGOs are registered either