Transcript Document

Financial Inclusion and
Responsible Micro-Finance
In Focus : Credit Infrastructure
A Presentation By
A K Srivastava, CGM, NABARD
Degree of Exclusion & Required Services
VISION 2012
Financial Inclusion of all RHH (11.15 cr) –
2015(50% by 2012).
Financial Inclusion to precede Poverty
Alleviation.
Financial Services within 15 minutes walk of
RHH - Last mile client should be able to use
POS/ Smart Card/ Mobile
RBI Working Group recommendation - A
banking outlet in each village with population
of 2000 and above, before March 2011.
Smart KCC/ GCC/ SCC to all eligible

One
Citizen
One
Card.
Innovation –
An Approach to Inclusive Growth
Micro Insurance/
Pension
 Cash flow in no- frill a/c thru’
Emi based loan Products
Loans to dependents of
 Innovative Credit products
wage earners
 Micro Insurance
Getting income from
business thru’ banks
Thrift/ Saving by Vulnerable
population
Increased awareness &
Financial Literacy
interventions

Empowerment thru saving
Power of compounding
Risk mitigation
Opportunities for
dependents
Break the poverty chain
Support economic growth
of country
Inclusion Process through KCC, SCC & MFIs Status
in lakh
Sl.
No.
Category
31 March
2007
31 March
2008
31 March
2009
1
No. of Savings Linked SHGs
41.60
50.09
61.21
2
No. of SHGs with O/s Loans
29.25
36.26
42.24
3
Loan O/s with SHGs
1236649
1699991
2267984
4
Kisan Credit Cards Issued
676.05
760.75
828.70
5
Swarozgar Credit Cards Issued
6.79
8.34
9.85
6
MFIs Covered
550
1109
1915
7
Loans O/s to MFIs
158448
274884
500909
Outreach of Banks including RRBs
Dep. ( Rs.
Dep.
No. of
Cr.)
Area
Per
Branches (Growth
A/c*
%)
384181
Rural 31829
18
(19.2)
Semi
560327
19418
29
Urban
(22.2)
4101518
Total 81090
56
(17.8)
Cr. ( Rs.
Cr..)
(Growth
%)
222372
(21.1)
278866
(17.8)
2881898
(10.6)
Cr.
O/s CD
per Ratio
A/c*
56
57.9
55
49.8
226
70.3
* In Rs. Thousand as on Mar 2008,
Other Infrastructure –Coop. & MFI
DCCBs / PACS :
MFIs Sa Dhan affiliated
MFIs - Client outreach
NB SHG/MFI Client outreach
MFI loan portfolio
Large – MFIs ( O/S portfolio>50 Cr)

12500/ 97000
> 800
233
>2 Cr
> 8.60 Cr
11700 Cr
28
General Perceptions - USPs of micro-Finance by MFIs
and Concerns
USPs
Small size loans without collateral
No insistence on specific purpose
On occasion, combined with hand holding & capacity
building
Hassle free (ease of access) and usually door delivery model
(local touch)
Concerns
High rate of interest/high cost of delivery of micro-credit
Lack of prudential norms in accounting
Lack of transparency/uniformity/supervision issues
Indiscriminate lending without past record scrutiny
Recovery not linked to cash flow from asset
Inclusion through 'No frills' A/c by Banks
Category
March 31, March 31, March 31,
2006
2007
2008*
Public
Sector
Banks
Private Sector
Banks
Foreign Banks
3,32,878
Total
4,89,497
* Provisional
March 31,
2009*
58,65,419 1,39,09,935 2,98,59,178
1,56,388
8,60,997
18,45,869
31,24,101
231
5,919
33,115
41,482
67,32,335 1,57,88,919 3,30,24,761
FIF and FITF - Funding Status
Year
Rs Crore
Total
(as on
date)
Fund
GoI
RBI
NABARD
Interest
Credited
FIF
10.00
*
5.00
-
15.00
FITF
10.00
*
5.00
-
15.00
FIF
37.00@
*
18.50
0.95
19.45
FITF
65.00@
*
32.50
0.96
33.46
31.03.08
31.03.09
Contribution : GoI : RBI : NB in the ratio 40 : 40 : 20
* RBI Contribution to be received on reimbursement basis.
@ GoI has been requested to release the amount
$ Amount sanctioned under FIF – Rs. 17.98 crore and under FITF – Rs. 7.48 crore
NABARD-UNDP Collaboration for FI
Rajasthan
UP
Bihar
MP
Jharkhand
Chattisgarh
Orissa
NABARD support for Financial Inclusion

As per the recommendations of Committee on Financial
Inclusion, two funds viz.,
o Financial Inclusion Fund (FIF)
o Financial Inclusion Technology Fund (FITF)
created with NABARD with corpus of Rs. 500 crores
each, to be contributed 40:40:20 by GoI, RBI &NB

Guidelines for FIF and FITF are issued to banks.

Advisory Board for FIF and FITF has been constituted.

Sub-Committee has been constituted under FITF.

State / District level workshops on Financial inclusion
conducted for Stakeholders.

National Conference on Financial Inclusion
One
Citizen
One
Card.
Financial Inclusion Fund
i. Funding support for capacity building inputs to BF/BC
ii. Providing promotional support to institutions such as
Resource Centres, Farmers’ Service Centres and Rural
Development and Self Employment Training Institutes to
enable them to provide improved tech.& financial services
iii. Providing funding support for promotion, nurturing and
credit linking of SHGs;
iv. Capacity building of personnel of NABARD, Banks, Post
Offices, State Government Departments, MFIs/ NGOs/
Local Level Associations, members of SHGs / JLG etc.
v. Defraying expenses of approved institutions for undertaking
interventions for financial inclusion in high excluded
Regions/ States
Financial Inclusion Fund (cont)
vi. Funding support for setting up of Rural Credit Bureaus and
Credit Rating of Rural Customers;
vii. Supporting initiatives of local level associations/
federations
viii. Supporting pilot projects for development of innovative
products, processes and prototypes for financial inclusion;
ix. Any other developmental and promotional interventions
recommended by the Advisory Board for the FIF.
Financial Inclusion Technology Fund
1. Encouraging user friendly technology solutions;
2. Providing financial support to technological solutions aimed at
providing affordable financial services to the disadvantaged ;
3. Creating a common technology infrastructure with comprehensive
credit information;
4. Funding support to technologies facilitating the documentation for
processing of loans;
5. Providing viability gap / pilot project funding for unproven but
potential technological interventions;
6. Conduct of studies, consultancies, research, evaluation studies
relating to technological interventions for financial inclusion;
FITF (cont)
7. Promoting seminars, conferences and other mechanisms for
discussions, dissemination relating to financial inclusion
technological interventions;
8. Publication of financial inclusion technology literature,
publicity material, etc.;
9. Capacity building of personnel of banks, Post Offices, State
Government Departments,MFIs, NGOs, VAs and other
stakeholders; and
10. Any other activity as may be approved by the Advisory
Board.
Approaches under FITF
Viability Gap Funding
Integrate with proposed Unique
Identification Card of GoI
Integrated approach of Financial Inclusion
- Projects involving micro insurance
schemes- life/asset/accident/ health etc.
Proposed support mechanism for Card
based project

Approaches under FIF
Financial Literacy Drive
Exposure visits/ workshop of
stakeholders
Certification Program for BC/ BF
Proposed support mechanism for
Farmers’ Club as BF
Sensitization programme through
training establishment
Financial Literacy

Financial Prudence
Understanding
Financial
Product
Financial
Market
Financial Analysis
Financial Empowerment
Financial Decision Making
Financial Well being
Approaches under UNDP
Exposure visits/ workshop of stakeholders
On the Spot loan appraisal/ sanction/ rating
evaluation through Mobile van system
Partnership with reputed and experienced NGOs
Financial Literacy
Resource Centre
Community Radio Service
Audio/ Visual display

New Dimensions of Credit Infrastructure
Need for Information sharing
-necessary to avoid over indebtedness
-control client delinquency
-financial services to non resident migrants
How ?
- Formal Credit Bureau
- Informal information sharing on regional basis
- Motivational issues for information sharing

Way Forward and Emerging Challenges
Need for Credit Bureau –Yes , possibly thro’
 Resource Centres at Local level (Block /Panchayat)
 Integration with Common Services Centre
 State level Federation (initially in select States)
 Risks
- Collateral coming into play,
- Exclusion thro’ black listing,
- Poaching among MFIs

Way Forward and Emerging Challenges (cont)
Credit Guarantee – Is it needed ?
- Requirement- Registration, Supervision of loan
portfolio of MFIs
- Application of prudential Norms
- Loss of informal character
“If Yes, to be linked to Rating of MFI and compliance
with Credit Bureau Requirements”
 Issues
- Policy formulation / funding-sharing arrangement /
management / operation / regulatory framework /
viability of scheme

Issues of Effective Outreach
Viability / Cost of delivery
- BC/ BF (door delivery model)
- MFI
- - Bank / Branches
 Involvement of MFI sector for FI
 Increased participation of Coop. - issue
taken up with RBI
 Support and linkage of financial services
to Govt payments- NREGA/ SS Pensions
 Projects/ proposals through Bank – RBI
 Open Standards for Technology
 Innovative Financial Literacy Drive

FI - Road map for Institutions
MFIs/ NGOs
Micro Credit/
Saving
BC/
BF
Stand Alone
Insurance
Insurance Cos
Banks/ Co-ops/ RRBs
Financial
Counselling/
Literacy
BC/
BF
Loan/ Credit A/c
Saving A/c
Financial
Inclusion
Remittances
Payment &
Remittances
Postal Savings
Post Offices
THANK YOU