How to Start a Microfinance Company In India
First way:
Register a Micro Finance institution/ NBFC incorporated through RBI Rules
– Eligibility: Must have INR 5 CR net owned fund(that is investment at the beginning)
– Govt Fees: 11 lakhs other than professional charges of consultants
– All microfinance companies are not entitled to accept public deposits. Only those who have approval from RBI and have an investment grade rating are allowed to accept/ hold public deposits to a limit of 1.5 times of its Net Owned Funds.
In India, there are more than 17000 NBFCs RBI is not giving permission easily to new microfinance companies. Though, if all formalities are complete and pre-conditions are satisfied, there is no reason for the RBI not to permit registration, nevertheless, the process takes a very long time at least 9 months to one year.
Second way:
Section 8 company incorporated under companies Act, 2013
– Cannot accept deposits from public
– Limit of loan that can be provided is: 50,000 for a business enterprise and Rs. 1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living
– Loan to be extended without collateral.
– Eligible borrower: Rural household with annual income not exceeding 1,00,000 or urban and semi-urban household income not exceeding 1,60,000
– Loan amount should not be more than 60,000 in the first cycle and 1, 00,000 in subsequent cycles.
– Total indebtedness of the borrower should not be more than 1, 00,000.
– For loan amount more than 30,000 tenure of the loan not to be less than 24 months
– Aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the micro finance institutions
– Loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower.
– No RBI approval on registration or to provide loan. But must follow guidelines for interest rates and processing fees.
To Incorporate Section 8 Company
– Minimum 2 directors required.
– Documents Required :
PAN Card of Directors (Copy), ID Proof of Directors (Prefer Aadhaar Card), Passport size photograph of all the Directors, Residential Proof of registered office (Telephone or Mobile Bill/ Electricity or Gas Bill), Landlord NOC (we will provide the format), Bank statement/Utility bill of Director