MICROFINAN

CE
INTRODUCTION

MICROFINANCE
 SOURCES OF
MICROFINANCE
 FORMAL INSTITUTIONS

 INFORMAL INSTITUTIONS

 SEMIFORMAL INSTITUTIONS
 Rural people are transacting with the INFORMAL
institutions.

The formal financial institutions refrain from such

 services because of the high risks.

 Lack of trust towards INFORMAL institutions.

Opportunity to FORMAL institutions and SEMI-


FORMAL institutions.

 Investing in markets low the interest rates of the

institutions.
 DEVELOPMENT STRATEGY

 ADB approved microfinance projects in 1988-

1998.

 ADB was not the well-defined strategy.

 NO response from financial institutions to this

strategy.

One option for rural Informal Institutions because


of no response form FINANCIAL institutions.
 INSTITUTIONAL FORMS
PROVIDING MICROFINANCE
The legal forms of microfinance institutions are:
Banks
Financial Corporations -Specialized entities focusing
on specific segments like SC/ST, Minorities
NBFCs-Commercial MFIs regulated by the RBI
Societies and Trusts NGO-MFIs and Section 25
companies
Mutually Aided Credit Society (MACS) -community
owned & managed operations -popular in Andhra
Pradesh
 MICROFINANCE
SERVICES
 MicroFinance is much broader than
justmicrocredit-it includes other financial
services:
 Savings
 Remittances
 Financial counseling
 Lifecycle planning products
These are specialized activities, it is not
easy to offer them to the poor in a cost
effective manner
 INTEREST RATES
Success of microfinance in Bangladesh and Indonesia has been to
 find a comfortable middle ground.
Raising interest rates too high may undermine the social and

economic impacts on clients and steer deserving customers away
from microfinance.

The middle ground has involved working hard to keep costs

 low so that interest rates can be kept relatively low as well.

 Institutions charging INTEREST RATES.

 Client Outreach and loan volumes
No of clients Loan outstanding
(millions) (Rs billions)

Segment 2007-8 2008-9 March 08 March 09

Banking 47.1 54.0 170.00 241.96

system (SHGs)
MFIs 14.1 22.6 59.50 117.34

Total 61.2 76.6 229.50 359.20

Working Hand in Hand
– FABINDIA OVERSEAS PVT LTD
Fabindia Overseas Private Limited

Twin Mandate

 A viable, profitable retail platform for

products created using hand-based
processes

 The creation of skilled, craft-based

sustainable jobs in the rural sector
 Sourcing as Differentiator
Present Scenario

 Over 30,000 crafts persons in the rural sector

 Sourcing from 21 states across India

Fabindia: Retail
Snapshot
• 108 stores across 40 cities

• 6 stores abroad

• Online Shopping &

Exports to 34 countries
Snapshot

• 17 fully operational community owned companies across

the country

States covered: Haryana, Rajasthan, West Bengal, Gujarat,

Madhya Pradesh, Gujarat, Uttar Pradesh, Delhi, Maharashtra,
Karnataka, Andhra Pradesh, Tamil Nadu

 11 have declared dividends

 Close to 15,000 share-holders

 Half yearly share trading rounds

 Going Forward
Future Plans

 200 Fabindia stores over the next 2-

3 years

 100,000 shareholders and five-fold

increase in skilled jobs in the rural
sector

 Supply map to cover the whole of

India
 HLL
EXPERIMENT
CONCLUS
ION