micro-finance in india - challenges and opportunities
TRANSCRIPT
Micro-Finance in India –Challenges and Opportunities
India has a large population that is unbanked, for
whom access to capital is not forthcoming.
Semi-skilled and unskilled labourers, unemployed,
under-employed and low-income individuals…
..have limited or no access to formal
banking services.
Micro-finance is the business of providing small sums
of loan to people who cannot access formal banking..
While micro-finance companies were set-up with
the supposed intent of serving the rural segment…
..there is a gradual but definite tilt in
focus towards urban India.
As of 2015, 67% of the 37 Million customers
live in Urban India
As of 2015, the Micro-Finance Industry Loan
Portfolio is reported to be of Rs.40,000 crore.
There is a systematic shift in the way micro-finance
industry is currently structured.
Today, Non-Banking Financial Corporations (NBFCs)
constitute over 90% of the micro-finance loan disbursals..
Key Growth Opportunities for Micro-Finance Players
include:
A. Pradhan Mantri Jan Dhan Yojana
This will help Micro-finance Institutions (MFIs) to
disburse loans directly to customers’ accounts.
B. Interest Rate Regulation
There is a cap on the interest rate charged by MFIs. This has
led to a fall in bad loans, which augers well for the industry.
C. Growth in Loan Disbursals
Per a recent report, the micro-finance industry has seen a
healthy growth in loan disbursements at 29% in Q1, 2016 - 17
Key Challenges faced by the Micro-finance industry include:
A. Lack of skilled personnel
B. Lack of Borrower data Records
C. High Cost of Borrowing
MFIs borrow from other institutions at a higher rate.
D. High Recovery Costs
In the event of non-payment of loan, the
recovery cost involved is high.
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