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Presentation on:
MICRO FINANCE-ROLE OF SFGS IN CAPITAL FORMATION By:Mr.Bharath.P

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CONTENTS:
Introduction Definition Strategic Policy Initiatives Activities In Micro Finance Micro Finance In India Is Micro finance creating financial capital? Self Help Groups How SHG work Sources of capital and links between SHGS banks SHGS Linkage Model Micro Finance Models Conclusion
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INTRODUCTION:
Provision of financial services such as credit,saving,

and insurance Poor individuals which fall below the poverty line Impact of improving livelihood opportunities through the provision of capital Founded of the grameen bank in bangladesh by yusuf Group lending, individual lending , the provision of savings and insurance, capacity building, and agricultural business development services Creation of social value
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Regulatory bodies of micro finance in india:

SHGs, NGOs,NABARD,1995
The National Microfinace Taskforce,1999 Working Groups on Financial Flows to the Informal

Sector.2002 Microfinance Development and Equity Fund,NABARD,2005 Working group on Financing NBFCs by Banks-RBI

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Activities in Micro finance

Microcredit
Micro savings

Micro insurance
Remittances

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Micro Finance In India

Credit Agency Government Cooperative Societies Commercial banks and RRBs Insurance Provident Fund Other Institutional Sources All Institutional Agencies Landlord Agricultural Moneylenders Professional Moneylenders Relatives and Friends Others All Non Institutional Agencies All Agencies
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Percentage of Rural Households 6.1 21.6 33.7 0.3 0.7 1.6 64.0 4.0 7.0 10.5 5.5 9.0 36.0 100.0
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Is Microfinance creating financial capital?

Invest in an Income generating activity
Poverty reduction Depends on borrowers Difficulty to isolate the effect of microcredit Depends on the interest rates micro finance

institutions charge Net capital accumulation Raises difficulty ethical questions about making profits on the back of the poor
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SELF HELP GROUPS(SHGs)

Major role on poverty alleviation in rural india
Actively engage in saving and credit Create some contorl over capital-very small amounts Gradually away form explotation and isolation

Definition: NABARD (1997) defines SHGs as "small, economically homogenous affinity groups of rural poor, voluntarily formed to save and mutually contribute to a common fund to be lent to its members as per the group members' decision".
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Contd:
10-25 members
Government of government and non-governmental

ageneies,they non-governmental agencies,they now make up 90 % of all SHGs Rules and regultaions of SHGs vary according to the members and those facilitating their formation Collect savings form members typically once a week Start without any external financial capital Small internal loans for micro finance enterprise
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Sources of capital and links between SHGs and banks

Link up with financial institutions-loans for

investments in rural enterprise

NGOs and banks are giving loans Matching loans Repayment-Recommendations by group faclitators,

collaterals provided

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SHGs-Bank linkage model:

MODEL I:

Bank itself as a Self help Group Promoting Institution(SHPI) MODEL II: Groups are formed by NGOS or by government agencies MODEL III: It is formed and nurtured by other agencies

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Rate of interest Under-Banks linkage programme:

Rate of Interest under SHG - Banks Linkage programme Particulars Existing rate of Revised rate % p.a Interest p.a NABARD to Banks Refinance 6.5 % 6.5% Banks to SHG 12% Banks to NGOs 10.5% No of participating Bank 202 550 Bank loan release (Rs in Millions) 570 520 No of NGO participating

NABARD Refinance

Loan per family 1,019 (release Rs in Millions)

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Comparative Analysis of Micro finance services offered to the poor:

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MICRO FINANCE MODELS:

Micro Finance Institutions
Bank Partnership Model Banking Correspondents

Service Company Model

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CONCLUSION:
Indias achievement of the MDG of halving the population

of poor by 2015 as well as achieving a broad based economic growth also hinges on a successful poverty alleviation strategy. In this backdrop, the impressive gains made by SHG-Bank linkage programme in coverage of rural population with financial services offers a ray of hope.
Underlying Belief of Self Help Groups.............. Give a man a fish and you feed him a day but teach him

how to fish and you feed him a lifetime Many little things done in many little places, by many little people, will change the face of the world. - An old Chinese saying
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