Welcome to My Presentation

Topic: Micro-Finance
 Presented By :
Nazmul H. Palash
ID-12-032
12th Batch MBA
Definition of Microfinance (MFI):

Provision of financial services to low income

people especially the women.

Evolved as an economic development approach

to benefit low Income groups.

Includes both Financial Intermediation & Social

Intermediation Services.

It is not only Banking but also a Development Tool.

 Background of Microfinance:

• Raiffeisen Model 1904 • MFIs arose in 1980s:

developed in As a response of
Germany • Cooperatives in Doubt about
• Cooperatives taught Indian Sub- Subsidized Credit by
poor farmers to save continent started. State to poor farmers

1864 1980s
 Features of Microfinance:
Collateral Free Group Lending

Character Based Approaches

High Frequency & Rate of Repayment

Use of Social & Peer pressure for better use & repayment

Lowering Transaction Cost through Group Sharing

 Financial Services of MFIs:
Financial Intermediation
Services

Enterprise Social Intermediation

Development Services Services

Insurance & Payment

Services
Functions of Microfinance:

Small Loan Like Working Capital

Informal Appraisal of Borrowers &

Investments

Collateral Substitute Like Group

Guarantee/Compulsory Savings

Streamlined Loan Disbursement &

Monitoring

Secure Savings Products

 Who Can be an MFI???

Credit Govt. Commercial

NGOs S & Ls
Unions Banks Banks Non-FIs
 Typology of MFIs Clients:

Traders Hair Dresser

Service Rikshaw
Providers Driver
Low-Income
Entrepreneurs
Typology of
Small Farmers Artisans
MFIs Clients
Self-Employed
Street
Vendors
 Size of Microfinance Industries:
Size of Microfinance Institutions
70%
63%
60%
60%

50%

40%

30%
23%
20% 17%
13%
11%
9%
10%
4%

0%

Commercial- Savings Credit Unions NGOs Others

Bank
% of Total Loans % of Outstanding Loans
 MFIs Industry Competitiveness:

Commercial/Savings
NGOs Banks
Credit Unions (CUs)

• Rely heavily on • Funded their loan • Funded their loan

donor funds & portfolios with portfolios with
Concessional clients Deposits & members Deposits
funds. Commercial Loans & Loans.

• Offer smallest loan • Banks & CUs are • CUs & Banks are
sizes but more leading in serving leading in serving
social services large no. of Clients large no. of Clients
than Banks, CUs. with small Deposit with small Deposit
A/Cs. A/Cs.
Why Microfinance is Growing???

Promise of Reaching Strengthening &

Poor Expanding formal FS

Promise of Financial Growing number of

Sustainability Success Stories

Potential to Build on Availability of Better

Traditional Systems Financial Solutions
Risks in Microfinance:
Improper Targets of Customer Segments

Under Operations

Absence of Policy Supports

Liquidity Problems

Lack of Technical Skills

Improper Financial Discipline

Diverse Local Contents

 Providers of MFIs Funds:
Formal Sector: Central Bank, Commercial/ Savings/ Rural/ Postal
Service/ Labor/Cooperative Banks, Development Banks, Non-
Bank FIs, Building Societies , Credit Unions and Contractual
Savings Institutions like Pension Funds.

Semi-Formal Sector: Savings and Credit Cooperatives, Multipurpose

Cooperatives, Banques Populaires, Cooperative –quasi-Banks,
Employee Savings Banks, Village Banks, Development Projects,
Registered Self-Helf, Group, Savings Clubs and NGOs.

Informal Sector: Savings Associations, Combined Savings and Credit

Associations, Informal FIs- Indigenous Bankers and Finance Companies,
Non-Registered Self-Helf Groups, Individual Money Lenders- Commercial
and Non-commercial like Friends and Relatives, and Traders, Shop Keepers.
Thank You Very Much for Your Patient
Hearing!!!