Microfinance in India plays a major role in the development of India. It act as an anti-poverty vaccine for the people living in rural areas. It aims at assisting communities of the economically excluded to achieve greater level of asset creation and income security at the household and community level.
Pan Card
Aadhar Card
Passport Size Photo
Director’s Address Proof/Bank Statement
Latest electricity bill/Utility Bill
Proof of ownership (rent agreement/ lease deed)
peer monitoring
It works properly as long as the bonds in the community are strong
Equal treatment to different borrowers, which can determine adverse selection and moral hazard
Increase the amount of loans through time
Useful to get the borrowers used to dealing with financial intermediaries
They reduce portfolio concentration
Compulsory savings to reduce exposure from financial innovation
Guarantee funds to partially transfer on other subjects the default risk of the borrowers
Special purpose vehicles and segregated capital used to isolate the project risk
Capability to attract subsidized funds
Cost of funding versus other financial intermediaries and/or institutions
Capability to collect deposits from public
Net of credit officers
Average dimension of microloans
The loan tenure is short
Microfinance loans do not require any collateral
• Microfinance provides access to capital for individuals who are financially underserved. If microfinance institutions were not offering loansto this segment of the society, these groups would have resorted to borrowing money from friends or family members. The probability of them opting for fast cash loans or payday advances (that bear huge interest rates) are also high.
• Microfinance helps these groups invest wisely in their businesses, and hence, is in alignment with the government’s vision of financial inclusion in the country.