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Define Economic

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Microfinance Microfinance ABC Workshop 18th Sep 2009 Why Microfinance Exist? • • • • • Accessibility Cost of transaction Dealing with bottom of pyramid Credit worthiness of borrowers Failure of formal financial institution to reach and cater this segment RBI mandates • Lending to Priority Sector (40% of Adjusted Net Bank Credit) • 18% to agricultural sector – Indirect lending not more than 4.5% • 10% to weaker section • Banks falling short of target shall allocate amount to RIDF at lower int. rate.(9%: BR – 3%) Do people need MFI??? • • • • Presence of Money lenders Is credit only the need? How a MFI functions? Catering poorest of the poor, poor, not poor not well off, BPL, APL Five fatal assumption about micro-credit 1. Assumption that the poorest all wish to be self-employed 2. Assumption that credit is the main financial service needed by the poor 3. Assumption that credit can automatically translate into successful micro-enterprises 4. Assumption that those slightly above the poverty line do not need microcredit, and giving it to them amounts to mis-targeting 5. Assumption that microcredit institutions can all become financially self-sustaining NSSO data • 27% of household have access to formal financial services • 22% of household don’t have access to formal financial institution but are catered by informal sector (money lenders) • Rest 51% don’t have any access of financial ...
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Very useful material for studying!