- By Arya Admin
- Posted August 19, 2019
Micro Finance in India - Challenges and Opportunities
Become self-sufficient with MBA Finance courses
India has a large population that is unbanked. For them, access to capital is not forthcoming. Semi-skilled and unskilled laborers, women, unemployed, under-employed and low-income individuals from MBA in Finance have limited or no access to formal banking services.
Micro-finance is the business of providing small sums of loan to the people who cannot access formal banking. In other words, it is a type of banking service provides to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. The goal of studying micro-finance at Best MBA College in Jaipur is to give low-income people an opportunity to become self-sufficient. It provides a means of saving money, borrowing money and insurance.
The shift from rural to urban India
Micro-finance companies were set-up with the supposed intent of serving the rural segment. There is a gradual but definite tilt in focus towards urban India. The data compiled by industry self-regulatory organization shows that around 67% of the Micro-Finance Institutions (MFIs) customers are living in urban India.
Customer base and loan portfolio
According to the industry reports, the finance sector had a customer base of million customers. The largest microfinance in India has turned into the bank with millions of customers. Also, a lion’s shares of all micro-finance loans are extended to women.
There is a systemic shift in the way the Micro-finance industry currently structures. It has become possible due to the curriculum of MBA Colleges in Jaipur. In the past decade, the micro-finance sector comprised mainly of NGOs. However, with the advent of time, several checks and balances have been introduced into the system including regulations introduced by the RBI. Today, Non-Banking Financial Corporation’s (NBFCs) constitute over 90% of the micro-finance loan disbursals.
- Jan Dhan Yojana - The current government focuses on financial inclusion through Pradhan Mantri Jan Dhan Yojana. It is a unique opportunity for the individuals of Top MBA Colleges in Jaipur to open bank accounts and become part of the mainstream. This provides them the opportunity to credit loans directly to customers’ account. This improves transparency and reduces the possibility of money getting re-routed or misused.
- Interest Rate Regulation - Earlier, MFIs do not regulate the interest rates charged for loan disbursals. This could lead customers to a perpetual debt trap. With RBI intervention, micro-financiers have a cap on the interest rates they can charge. It is not more than 10 – 12% above their own borrowing costs.
- Growth in Loan Disbursals - The micro-finance industry has seen healthy growth in loan disbursements with the students of Best Colleges for MBA.
Challenges in the financial sector
As an industry, the micro-finance sector trouble by a number of limitations. These include:
- Political Intervention - Since micro-financing involves financing the economically weaker sections of the society, the business takes a hit due to political interference in removing defaulters. However, it includes the farming community and others with political patronage.
- Lack of Skilled Personnel - Micro-finance is a relatively new sector and lacks skilled personnel.
- High Cost of Borrowing - Many MFIs blocks from accepting deposits from customers owing to the sensitivity of the customer base served. Banks borrow at a lower rate and lend at a higher rate using the difference for operational expenses.
- Lack of data Records - Though the nation is moving towards a Unified identification system, it allows financial service providers. However, it has access to borrower information including their loan repayment track record. Lack of borrower information makes it difficult to assess repayment capacity.
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