1. Micro Credit

2. Micro Finance
Providing small loans mostly without collateral and accepting small savings deposits.
Micro finance originated in low income countries.
Non traditional methods of loan selection.
Low income borrowers do not become eligible to borrow due to their low borrowing powers.
Objective of financing is to remove poverty levels in a society/ economy than profitability of banks from the transaction
Micro finance aims at empowering women to achieve self reliance.
Microfinance often is a group activity that derives its strength from strength of the participating community.

3. History of Micro Finance
Mr. Mohammud Yunus started a series of experiments lending to poor households in the nearby village of Jobra in Bangladesh (1976) .
Successful functioning of households in Jobra motivated the Bangladesh Bank, the Central Bank of Bangladesh, to set up a special branch that catered to the poor of Jobra.

4. History of Micro Finance
After a successful trial project in North-Central Bangladesh, micro finance was expanded by the bank nation wide
Founding of Grameen bank by Mr. Mohammud Yunus in Bangladesh
Government surveys found over 80 percent of the population living in poverty in 1973–1974 in Bangladesh (Bureau of Statistics ,1992)

5. Need for Micro Finance
Poverty alleviation.
Sustainable financial programs by the government.
Fund allocation by the government through banking institutions.
Mobilizing small deposits from poor rural and urban areas.
Meeting the lending needs from rural and urban poor.

6. Micro Finance Fundamentals
Supply leading finance theory
Imperfect information paradigm
Informal credit markets
Savings of the poor

7. Micro Finance Objectives
Provide access to funds for the poor
Encourage entrepreneurship and self-sufficiency
Manage risk
Empower women
Benefits to community as a whole

8. Micro Finance Features
Micro credit
Small loans
Income generation activities
Consumption needs
Contingency needs
Micro savings
Thrift
Small savings
Group resources

9. Micro Finance Approach
Poor are bankable.
Trade off between reaching the poor and profitability.
Poor need not depend on charity.
Responsible borrowers on business terms for mutual profit.
Poor households need to save.
Poor have the capacity to save small amounts regularly.
Poor are willing to save provided they are motivated and facilitated.
Easy access to credit is more important than cheap subsidized credit.
Credit without bureaucratic procedures.
Peer pressure in groups helps in improving recoveries.

10. Micro Finance Credit
Group Lending Methods
Grameen Model
Loan disbursal by groups and group matching
Solidarity Group Approach
Village Bank Model
Members are strangers to each other

11. Benefits of Micro Finance
Microcredit leads to an increase in household income.
Loans and deposit services can result in diversification of income sources or enterprise growth.
Access to financial services enables clients to build and change their mix of assets.
Access to microfinance enables poor people to manage risk better and take advantage of opportunities.

12. Benefits of Micro Finance
For women, greater control over resources leads to growth in self-esteem, self-confidence and opportunities.
Microfinance clients tend to have higher levels of savings than non-clients since there is a necssity for building assets.

13. Benefits of Micro Finance
Enterprise revenues rise as a result of microfinance services.
Job creation in single-person enterprises appears negligible, but client households often create work for others.

14. Micro Finance Institutions
Dual goals of microfinance influences hiring practices, compensation policies and corporate culture in ways that can make the governance of microfinance institution closer to running an educational institution than bank.
Management of microfinance.
Principal agent theory.
Compensation aspects.
Compensation for unobservable efforts.

15. Features of Institutional Micro Finance Program
Target oriented program allocation.
Government grants and subsidies fund the micro finance program.
Credit facility to the poor is delivered through commercial banks that have branches.
Credit facility to the poor may also be linked to non government organizations and commercial banks.

16. Desired Results of Micro Credit
Eradication of poverty
Mass education
Provide gender equality
Women’s empowerment
Reduce child mortality
Combat diseases
Develop entrepreneurial spirit