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Considerable gap between demand and supply
for all financial services. Majority of poor are
excluded from financial services. This is due to,
inter-alia, the following reasons :
1. Bankers feel that it is fraught with risks and
uncertainties.
2. High transaction costs
3. Unfavorable policies like caps on interest rates
which effectively limits the viability of serving the
poor.
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The beginnings of Microfinance movements:-
In 1974, in famine struck Bangladesh.
The simple idea that the poor could use credit to lift
themselves out of poverty led Dr. Mohammad Yunus
to create the Grameen Rural Bank in 1983.
In 2006, the Grameen Bank and Dr.Yunus were
awarded the Nobel Peace Prize.
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Explosive growth:-
In 1970s and 80s,inspired by Grameen bank’s success,
social innovators and organisations around the world
began to experiment with different programs to bring
financial services to the poor.
In 2006, microfinance summit campaign Report
estimates that there are now more than 3000
microfinance institutions, serving more than 100
million poor people in developing countries.
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Microfinance goes mainstream:-
In the early years of microfinance, most of the these
organizations were funded by either private or
government grants.
But in recent years, many institutional and high net
worth investors have begun to invest in microfinance.
Today, major banks like Morgan Stanley and Citigroup
have begun to offer products and services that enable
investment in microfinance.
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A self-help group (SHG) is a village-based financial
intermediary usually composed of between 10-20 local
women
Having homogeneous social &economic background
Mutually agree to contribute to a common fund
Meet their emergency needs
Major activities: saving & credit activities (apart from
other activities focusing on women’s empowerment,
health and educational attainment, etc).
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Some of SGHs are-
Ekta Mahila Bachat Mandal
Shiv Mahila Bachat Mandal
Nilkanth Mahila Mandal
Nari Shakti Bachat Juth
Shri Adarsh Group Bachat Mandal
Jay Mahakali Karigar YuvakMandal
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To create group feeling among women.
To enhance the confidence and capabilities of women.
To develop collective decision making among women.
To encourage habit of saving among women and
facilitate the accumulation of their own capital
resource base.
To motivate women taking up social responsibilities
particularly related to women development.
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NABARD, in 1996
By march 06 ,22,38,565 were linked with banks
545 banks participating
4869 promoting partners
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Micro-finance and Poverty Alleviation
The Formal Sector Institutions
The Existing Informal financial sources
Credit Mechanisms Adopted by HDFC (India) for
Funding the Low Income Group Beneficiaries
Other Institutions like Grameen Banks.
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The idea of microfinance not being just about credit,
transactions takes its inspiration from the "Credit-Plus"
approach. The Credit-plus approach essentially integrates
adequate and timely credit into larger developmental processes
such as community organizing, leadership training,
entrepreneurship etc.
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Microfinance does not directly address
some structural problems facing Indian
society and the Economy
Loans products are still too inflexible.
Its progress in delivering financial services
in less densely populated areas has
been slow
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Lies in the areas of training and capacity
development.
Poor regulation and supervision of
deposit taking- MFI’s
Few MFI that meets the need for savings,
remittances & insurance
Little evidence of progress towards the
goal of microfinance.
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