The Microfinance Industry in India

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Case Details:

Case Code : FINC042
Case Length : 23 Pages
Period : 1990-2005
Pub. Date : 2005
Teaching Note :Not Available
Organization : Microfinance
Industry : Microfinance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Future

Many private and foreign banks have unveiled their plans to enter the Indian microfinance sector because of its very low NPAs and high repayment rate of more than 95% in spite of offering loans without any collateral security.

The main reason for high repayment rates was that the loans were managed at the community level. Borrowers took loans to improve their standard of living and start a small business. If the repayment was done in time, only then were more loans given. According to Udaia Kumar, Chairman and Managing Director, SHARE Microfin Limited, "In all cases there is no security taken. We don't have a legal system. We build a relationship with the client. We motivate them, train them, and give them the confidence that they have the capacity to handle. We ensure that the money is used for the purpose that they have taken. We ensure that they make profits. Then definitely they will come back with the repayment. Our repayment rates are 100%...

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Exhibits

Exhibit I: State Wise Distribution of SHGs (as on March 2004)
Exhibit II: Number of SHGs Formed by Public Sector Banks - Credit Provided
Exhibit III: SHG-Bank Linkage Model Wise Cumulative Position (As On March 2004)
Exhibit IV: Sources of MFI Funding
Exhibit V: SHG-Bank Linkages Program (Operational Highlights 2003-04)
Exhibit VI: SHG Bank Linkage Program (Support to RRBs Functioning as SHPI)
Exhibit VII: SHG Bank Linkage Program (Grant Assistance Sanctioned to Banks Under Cooperatives as SHPI)
Exhibit VIII: Role and Responsibilities of Farmers' Club Volunteers
Exhibit IX: Promotion of SHGs Through Farmers Clubs
Exhibit X: Identification of Mature Groups for Promotion of Micro Enterprises

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