Microfinance

Published by: Cygnus Business Consulting and Research

Published: Sep. 1, 2008 - 100 Pages

Table of Contents

EXECUTIVE SUMMARY

HIGHLIGHTS

1. MICROFINANCE - AN OVERVIEW

1.1 Microfinance - A Short Background

1.2 Global Developments in Microfinance

1.2.1 Penetration in South Asia

1.3 Micro-Finance in India

1.3.1 Models practiced in Indian Microfinance Industry

1.3.1.1 MFI Model

1.3.1.2 Self Help Group Bank Linkage Model

1.3.2 MFI and SHG Bank Linkage Credit Supply

1.3.3 Role of Central Banks

1.3.4 Role of Women

1.3.5 Microfinance & Poverty Alleviation

1.4 Urban Microfinance

1.5 Rating of Microfinance Institutions

1.5.1 Indicators for rating

2 MARKET SCENARIO

2.1 Market Size and Growth

2.2 MF Institutions

2.2.1 SKS Microfinance

2.2.1.1 Introduction

2.2.1.2 Business Activity/Products and Services

2.2.1.3 Business Strategy

2.2.1.4 Outlook

2.2.2 SHARE Microfin Limited

2.2.2.1 Introduction

2.2.2.2 Business Activity/Products and Services

2.2.2.3 Business Strategy

2.2.2.4 Outlook

2.2.3 BASIX

2.2.3.1 An Introduction

2.2.3.2 Business Activity/Products and Services

2.2.3.3 Business Strategy

2.2.3.4 Outlook

2.3 Role of NGOs in microfinance

2.3.1 SEWA

2.3.1.1 Introduction

2.3.1.2 Business Activity /Products and Services

2.3.1.3 Business Strategy

2.3.1.4 Outlook

2.3.2 Mysore Resettlement and Development Agency

2.3.2.1 Introduction:

2.3.2.2 Business Activity / Products and Services

2.3.2.3 Business Strategy

2.3.2.4 Outlook

2.3.3 PRADAN

2.3.3.1 Introduction:

2.3.3.2 Business Activity/Products and Services

2.3.3.3 Business Strategy

2.3.3.4 Outlook

2.3.4 Society for the Promotion of Area Resource Centres

2.3.4.1 Introduction:

2.3.4.2 Business Activities/Products and Services

2.3.4.3 Business Strategy

2.3.4.4 Outlook

2.4 Private Banks

2.4.1 ICICI Bank

2.4.1.1 Introduction:

2.4.1.2 Business Activity/Products and Services

2.4.1.3 Business Strategy

2.4.1.4 Outlook

2.4.2 ABN Amro Bank

2.4.2.1 Introduction:

2.4.2.2 Business Activity/Products and Services

2.4.2.3 Business Strategy

2.4.2.4 Outlook

2.2.3.2 Business Activity/Products and Services

2.2.3.3 Business Strategy

2.2.3.4 Outlook

2.3 Role of NGOs in microfinance

2.3.1 SEWA

2.3.1.1 Introduction

2.3.1.2 Business Activity /Products and Services

2.3.1.3 Business Strategy

2.3.1.4 Outlook

2.3.2 Mysore Resettlement and Development Agency

2.3.2.1 Introduction:

2.3.2.2 Business Activity / Products and Services

2.3.2.3 Business Strategy

2.3.2.4 Outlook

2.3.3 PRADAN

2.3.3.1 Introduction:

2.3.3.2 Business Activity/Products and Services

2.3.3.3 Business Strategy

2.3.3.4 Outlook

2.3.4 Society for the Promotion of Area Resource Centres

2.3.4.1 Introduction:

2.3.4.2 Business Activities/Products and Services

2.3.4.3 Business Strategy

2.3.4.4 Outlook

2.4 Private Banks

2.4.1 ICICI Bank

2.4.1.1 Introduction:

2.4.1.2 Business Activity/Products and Services

2.4.1.3 Business Strategy

2.4.1.4 Outlook

2.4.2 ABN Amro Bank

2.4.2.1 Introduction:

2.4.2.2 Business Activity/Products and Services

2.4.2.3 Business Strategy

2.4.2.4 Outlook

2.5 Commercial Banks

2.5.1 State Bank of India

2.5.1.1 Introduction:

2.5.1.2 Business Activity/Products and Services

2.5.1.3 Business Strategy

2.5.1.4 Outlook

2.5.2 National Bank for Agriculture and Rural Development

2.5.2.1 Introduction:

2.5.2.2 Business Activity/Products and Services

2.5.2.3 Business Strategy

2.5.2.4 Outlook

2.5.3 Small Industries and Development Bank of India

2.5.3.1 Introduction:

2.5.3.2 Business Activity/Products and Services

2.5.3.2 Business Strategy

2.5.3.4 Outlook

3. GROWTH DRIVERS

3.1 Need for Bank Credit by Unprivileged Class

3.2 Availability of Finance

3.3 Government Policy and Support

3.4 Consolidation in the Industry

3.5 Growing Migration and Urbanisation

3. 6 Human Resource Capacities

4. ISSUES & CHALLENGES

4.1 Literacy & Skill Levels of Clientele

4.2 High Transaction and Service Cost

4.3 Credit Risk

4.4 Skewed Regional Distribution of Microfinance

4.5 Diversion of Funds to Unproductive Activities

4.6 Regulatory Issues

4.7 Irregular Flow of Income due to Seasonality

4.8 Uncertainty of Market Conditions

4.9 Lack of Tangible Proof for Assessment of Income

4.10 Need for Information Sharing & Better Technology

5. OUTLOOK

5.1 Size and Growth

5.2 Penetration of Microfinance in Future and Role of Private Sector Investment

5.3 Sustainability of Microfinance

5.3.1 Policy Environment

5.3.2 Financial Infrastructure

5.3.3 Developing Viable Microfinance Institutions

5.3.4 Pro-poor Innovations

5.3.5 Social Intermediation

5.4 Scalability of Microfinance in Future

ANNEXURE - BIBILOGRAPHY

LIST OF FIGURES

Fig.1.1 Savings by Region

Fig.1.2 Savings by Region 953 MFIs Reporting, July 2007 61 Million Savers

Fig.1.3 MFI's by region, Based on a sample of 2,207 MFIs in 2007

Fig 1.4 Direct Financing Model

Fig 1.5 SHG Bank linkage Model

Fig 1.6 Growth in borrowers under MFI channel (2003-2007)

Fig 1.7 Growth in outstanding loan portfolio under MFI channel (2003-2007)

Fig 1.8 Estimated loan outstanding under SHG bank linkage channel ( 2003-2007)

Fig 1.9 Share of bank linkage SHG and MFIs in microfinance disbursement (2003)

Fig 1.10 Share of bank linkage SHG and MFIs in microfinance disbursement (2007)

Fig 1.11 Growth in cumulative disbursements by SHGs and MFIs channels (2003-2007)

Fig 1.12 Instituitional flow of microfinance

Fig 2.1 Major market players in rural credit

Fig 2.2 Growth in client outreach by MFI’s

Fig 2.3 Classification of activities - Micro credit loan being taken

LIST OF TABLES

Table 2.1 Growth of SHG Linked in 13 Priority sectors

Table 2.2 Growth of SHG’s in Regions

Table 2.3 MFI Outreach State-wise

Table 2.4 Top 40 MFI Institutions and their Active Borrowers (2007)

Table 2.5 Top Microfinance Institution Performance in the year 2007

Table 2.6 Top 20 Districts by MFI Penetration (2007)

Table 2.7 Earnings of the poor in the developing countries from the micro-enterprises may vary from 29% - 236% (2008)

Abstract

Introduction

Indian microfinance sector is expected to grow nearly ten times by 2011 to a size of about Rs250 billion from the current market size of Rs27 billion, at a compounded annual growth rate of 76%. Microfinance in India started evolving in the early 1980s with the formation of informal Self Help Group (SHG) for providing access to financial services to the needy people who are deprived of credit facilities. The Report on microfinance is prepared emphasizing more

Key Findings & Highlights

• One of the fastest growing sectors of India, microfinance is spearheading intense competition among the largest players.
• Microfinance institutions at present serve an estimated 120 million clients in the world.
• By the end of March 2007, microfinance institutions expanded their outreach to 50 million households and about 36.8 million borrowers.
• The microfinance institutions are organised under three models: SHG, Grameen model/Joint liability groups and Individual banking groups as in cooperatives.
• Indian microfinance market is dominated by SHG bank linkage and MFI model.

Reasons to buy

• Get a thorough understanding about the demand for rural credit
• Spot the growth drivers of the sector
• Asssess the key challenges such as transaction cost,risk management etc
• Be aware of the competition in the microfinance market

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