Micro Finance: Role of

NGO s
 Flow of content
• Introduction
• Emergence of MFI s and the growth of
Micro-finance sector in India
• Role of NGO as a promoter and facilitator
• Key considerations for an NGO playing
role of facilitator
• Key constraints/tasks
• NGO setting up a MFI as a separate entity
• conclusion
 Micro Finance
“provision of thrift, credit and other financial
services and products of very small amounts to
the poor in rural, semi-urban or urban areas, for
enabling them to raise their income levels and
improve living standards”
Prof., Mohammad
Yunus
 Emergence of MFI s
and growth
• Micro finance as a tool to attack poverty
• Provides thrift and very small amount to poor in
rural, urban and semi-urban areas
• About 2000 NGO s involved in NABARD
(National Bank for Agriculture and
Rural Development)
• 350 new generation co-operatives – thrift and
credit services
• Emergence of community institutions
Eg.,Sa-Dhan
• Emergence of community banks
Eg., 1.Arya Vishya Bank
• Federation of Self Help Groups( SHG s)
 Different ways of
helping SHG s by NGO
• NGO as MFI s –s/MFI
promoting s
SHG s
oMyrada in Karnataka promoted by
sangamitra
oPRADAN established by large number of
SHG
• NGO directly lending to the poor borrowers –
either organized as SHG s or Grameen Bank
• Borrowing funds from SIDBI,
RMK( Rashtriya Mahila Kosh), FWWB
(Friends Women World Banking)
• MFI s organize as NBFC (Non Banking
Financial Companies)
Eg.,BASIX, CFTS Mirzapur, SHARE
Microfinance Limited etc.,
 Role of NGO as promoter
and facilitator

• Act as linkages – SHG s and Banks

• SHG empowered model

• Co-operatives/Federations
 Key considerations for
an NGO playing role of
a facilitator
• Ability to fulfill capacity building – financial
management, book keeping and audit which
ensure ownership, self-reliance of a co-operative
• Establishing forward linkages – state
government etc.,
• Need to build strategies for empowerment and
generating mutual trust and respect amongst
group
 Key constraints/tasks
• Comply with stringent legal and regulatory
requirements;
• Withstanding long and expensive transition
process
• Balancing between their social mission of
outreach to the poor and the need to achieve
financial sustainability
• Acquiring necessary skills and arranging
financial/technical capacity building
• Creating appropriate support and monitoring
system
NGO setting up an MFI
as a separate entity
• Requires altogether different support and
monitoring systems, and work culture for the
new entity.
• Example: NGO (Myrada) set up an MFI
(Sanghamitra)
 conclusion
• The MFI s, which have emerged as powerful tool
to remove poverty may be made a part of
financial system for effective delivery of rural
financial services. The NGO’s need to gear up
their network for facilitating linkages of SHG s
where the programme has not shown
satisfactory progress.