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Small Industries Development Bank of India

Financial Inclusion Programmes

S. Muhnot, Chairman & Managing DirectorDecember 05, 2011Thimphu

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Financial Inclusion

Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players.

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Financial Inclusion Twin Aspects of Financial Inclusion - Financial Inclusion and Financial

Literacy are twin pillars. While Financial Inclusion acts from supply side providing the financial market/services what people demand, Financial Literacy stimulates the demand side – making people aware of what they can demand.

Financial Literacy & Financial Inclusion

Extent of Financial Inclusion -India

In India, around half of the country is banked.

Approx. 55 per cent of the population have

deposit accounts and 9 per cent have credit

accounts with banks.

There is one bank branch per 14,000 people.

Around 20% of the population have life

insurance and 9.6% of the population have non‐

life insurance coverage. 4

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Financial Inclusion – The Indian Way

Board approved Financial Inclusion Plans (FIPs) of banks for 3 years, starting April 2010.

Roadmap to cover villages of above 2000 population by March 2012

Availability of minimum four banking products through Information Communication Technology (ICT) model has been ensured .

Mandatory opening of 25 % of new branches in unbanked rural centers.

Know Your Customer (KYC) documentation requirements significantly simplified for small accounts.

Pricing for banks totally freed . Interest rates on advances and deposits totally deregulated.

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Financial Inclusion – Models and ActivitiesBusiness Facilitator

(BF) – NGOs, Farmer Clubs,

Community based organisations, Co-operative

Societies, Panchayats, IT enabled rural outlets of Co-

operative Entities

Business Correspondent (BC) –

Section 25 companies, NBFC not accepting

deposit, Post Offices, NGO MFIs under

Societies/trusts, MACS

All activities of BF

+•Collection of small value deposits•Enabling withdrawals•Sale of other financial products•Receipt and delivery of remittances / payment instruments•Disbursal of small value credit and recovery of principal and interest in a limited way

• Identification of borrower• Collection and verification

of primary information• Processing and submission

of application to banks• Monitoring and Follow-up• Educating about savings,

other products, debt counseling

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Micro Credit as a tool for Financial InclusionMicro Credit as a tool for Financial Inclusion Demand (overall)

Potential market: 77 mn.

Households

Estimated annual micro credit

demand: USD 18 bn to 27 bn.

Demand for other services: USD

2.43 bn.

Supply (overall)

Two major channels

Small Industries Development Bank of

India (SIDBI) pioneered Microfinance

Institutions (MFI) lending channel

SHG-Bank Linkage Programme

pioneered by National Bank for

Agriculture and Rural Development

(NABARD)

These twin channels have total size of

around USD 10bn. serving 120 mn

clients

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SIDBI – An Apex Financial Institution

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Role of SIDBIRole of SIDBISupply side – Microfinance

Activities

• Help transform NGOs/Societies Help transform NGOs/Societies

etc. to more regulated entities. etc. to more regulated entities.

• Associated with more than 150 Associated with more than 150

MFIsMFIs

• Introduced the concept of rating of Introduced the concept of rating of

MFIsMFIs

• Term loansTerm loans

• Equity / Quasi EquityEquity / Quasi Equity

• Capacity Building GrantsCapacity Building Grants

Demand Side – Promotional & Developmental Activities

• Enterprise promotion programmes

• Skill-cum-Technology Upgradation

Programme

• Cluster Development Programme

(CDP)

• Entrepreneurship Development

Programme (EDPs)

Phases of Microfinance Programme of SIDBI - Learning

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Promotional & Developmental InitiativesPromotional & Developmental Initiatives

ApproachAchievemen

t

Rural Industries Programme (RIP)

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Addressing the Missing MiddleAddressing the Missing Middle(> USD 1000 upto USD 20,000)(> USD 1000 upto USD 20,000)

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SIDBI –SIDBI – Products & ServicesProducts & Services

REFINANCE

WORKING CAPITAL FINANCE

RECEIVABLE FINANCE

MICRO CREDIT

PROMOTIONAL & DEVELOPMENTAL

ACTIVITIES

TECHNOLOGY UPGRADATION,

CLUSTERDEVELOPMENT

RISKCAPITAL

DIRECT FINANCE

SIDBI

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THANK YOU