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2 Microfinance Institutions

3 Sa-Dhan, The Association of Community Development Finance Institutions (biggest Apex body of Microfinance Institutions in India)

sample MFIs reside in urban areas. With increasing migration from rural to urban areas,

many MFIs are now also increasing their focus on urban areas, the report says.

Further According to Sa-Dhan, Bharat Microfinance Report, MFIs hold nearly 90% of the total loan portfolio outstanding by MFIs and the 10 largest MFIs have the highest portfolio growth rate among all MFIs from last year to current year. For profit MFIs have also reported the highest growth rate among all legal forms of MFIs. 246 MFIs operates in 517 districts in India spread across 27 states. The total MFI client outreach as of march 2011 was 3.17 crore while the total microcredit outstanding was Rs. 2500 crore which have been scrutinized to bank. During 2010-11, the microfinance through MFI channel has grown 18.75 percent in term of client outreach an 13.15 percent in terms of credit portfolio. MFIs collectively disbursed RS. 33730 crore as loan to clients during 2010-11 and the average loan per client stood at Rs. 9766 crore respectively.

The RBI had brought in a condition of Qualifying Asset by which the MFIs should create loans assets that would meet certain conditions like maximum loans amount of Rs. 50000 atleast 75 percent of loan to be given for income generation purpose etc. for availing loan under priority sector credit scheme s from the banks. The data provides evidence to reasonably conclude that Indian MFIs in general possess Qualifying Assets. The cost structure of MFIs showed that the operating costs of MFIs in general are higher than what the Malegam Committee4 had estimated in 2010. MFIs in all likelihood, would find it difficult to contain the margin Cap (Yield over Borrowing Cost) of 12 percent set by RBI. The MFIs in general are self sustainable in meeting their expenses of their income, leaving, of course, just a marginal surplus to meet their growth needs.

The current literature on micro finance is dominated by the positive linkages between micro finance and achievement of Millennium Development Goals5 (MDGs). Micro Credit Summit Campaign’s 2005 report argues that the campaigns offers much needed

4 Malegam Committee, RBI in 2010 set up a Sub-Committee of its Central Board of Directors , under the Chairmanship of   Shri Y H Malegam.

5 Millennium Development Goals The Millennium Development Goals (MDGs) are eight international development goals that were officially established following the Millennium Summit of the United Nations in 2000.