3. Microfinance Business Model

As a sales representative in a position of power to the side and are evaluated on the reimbursement rates that the first measure of success, they sometimes apply to coercive tactics and even violence to collect micro-credit payments. Some recipients of loans fall into a cycle of debt, with the help of a micro-credit organization for the interest of other commitments.

Indian govt recent decision of borrowing by farmers to repay certain segment is the result of the crime. To avoid such incidents again, it is better to invest in education in this segment by establishing a regular source of income for families.

The need for technology
Microfinance technology will not only help recover data for deserving borrowers, but also in monitoring the flow of money to help. Theoretically, the micro-finance all efforts to increase access to one or improve the quality of financial services to the poor currently use or during use of advantage. The poor borrow from informal lenders and save with informal collectors: For example. They received loans and donations. You buy the insurance of state enterprises. You will receive transfers by wire transfer networks (such as hawala). Technology can help monitor and improve the accessibility of resources to be acquired part of the company, while microfinance institutions can help to measure and report their performance, both financially and socially for the government.

On the lines of the core banking solutions, all MFIs in a country to each other over the network, which ultimately connected assist Govt. Organization to follow the flow of the source of funds. Doing so may help in the LAM.

Good advice can decide to MFIs and NGOs, to the appropriate industry that can help create in a particular place. Have a place regarded as Vidarbha, which lacks adequate irrigation facilities, can best be in place for an energy company to have a solar system can be assessed. It is much more affordable than loan borrowing struggling families of farmers who are in repayment of existing loans.

Completion
Some valuable lessons can be learned from the experience of the functioning of microfinance.

First, the poor repay their loans and are willing to pay a higher interest rate than the commercial banks under the condition that the company pay to take the credit, they successfully held.

The technique should be used for good, while streamlining the flow of funds to create a transparent business model for MFIs.

Consultants should be used to determine whether to ensure the establishment of heavy industry to a greater stability of the target segment.

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2. Microfinance Business Model

The business model on which the majority of the joint work of the microfinance loan. Solidarity lending is a loan in which small groups of members to encourage borrowing group companies against each other to repay. It is an important part of microfinance. Solidarity lending lowers the cost of a financial institution in terms of assessment, management and collecting loans and can eliminate the need for collateral.

A pioneer of group lending, describes Dr. Muhammad Yunus of the Grameen Bank in Bangladesh, the dynamics of lending through solidarity groups as follows:

"... Group membership not only provides support and protection, but also smooth the misconduct of individual members, so that any borrower in the process more reliable. Peer pressure sometimes subtle and not so subtle, in each group remains online with the overall objectives of the credit program .... because the group agrees to the loan application each group member accepts the moral responsibility of the loan. When a group member in trouble, will meet the group at the most forward to help. "

According to this model minimizes the crime rate. Source of income for most microfinance institutions (MFIs) are the high interest rates they charge borrowers, the average real return portfolio was a sample of 704 microfinance institutions, the Micro Banking Bulletin 2006 voluntarily provided 22.3% per year. Microfinance institutions can expand their resources through the mobilization of savings, capital markets, loan funds and effective support for institutional development. To use a logical way to the capital markets, the securitization of loans through micro-enterprise institutions with funds by issuing bonds on the purchases of capital goods. At least one pilot tried to securitize microfinance portfolio in this direction in Ecuador. Alternatively, Bolivia BancoSol a certificate of deposit, which are traded in the Bolivian market. In 1994, he also gave certificates of deposit in the United States (Churchill, 1996). The Foundation for Development Cooperation and obligations of Paraguay to capital for micro-loans (Grameen Trust, 1995). Successful MFIs such as Grameen Bank also generate income through training / research for journalists on new MFIs.

Another type of MFIs in India has acquired the development known as chit funds, they are the closest to a bank in many parts of India. They mobilize a large number of small and offer the same savings as a kind of micro-financing. Chit funds properly is an effective tool for unexpected costs, unexpected and unpredictable, especially for the middle class and small businesses used to meet. Chit Fund is an instrument with a dual use for loans and savings. He has no credit and insurance. Each group is chit in a sense a self-help group. Members invest a fixed amount per month. This collection is available for loan. The auctions are conducted each month. To attract new members with the highest discount. The dividend for each sale is available to subscribers of the discount (the difference between the chit and the amount of the offer) to pay, unless the group leader of the Commission. Shriram chits over 22 lakh subscribers.

The proposed model for MFIs
Considering that give the role of the IMF to lend to the poor sector of society, so to increase their standard of living and to provide a stable life for their families, is only possible if a group member can be with a business idea. But how successful the company is after training and in the timely repayment of the loan can not be guaranteed to perform. Personally, I think, rather than decide the inexperienced group, the company all the time, MFIs or NGOs to target companies that are either a subsidiary of the existing stable or something that can be negotiated outside community to ensure that the money flows. This will provide a stable and regular source of income for many households without the stress of the loan. The reason is behind the criticism of microcredit. Some experts suggested that most microfinance institutions are overly dependent on foreign capital. A study of microfinance institutions in Bolivia in 2003 as they found were really slow, to improve the quality of the micro savings services by easy access to cheaper forms of external data tables capital.Global Micro Banking Bulletin of the show, that the savings of a small source of funding for microcredit in most developing countries represent.

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1. Microfinance Business Model

"Microfinance" is often defined as a financial services for poor and low income customers. In practice, the term offer often close loans and other services related to vendors who define themselves as "microfinance institutions (MFIs). These institutions often tend to develop new business models in the past 30 years, with very small loans to creating borrowers with arrears to use, with little or no warranties. These methods include group lending and liability, pre-purchase savings needs, the loan amount will increase gradually, and the implied warranty of easy access to future loans, if any loans be repaid in full and without delay.
Inception, that MFIs

MFI occur if the lack of access to credit for the poor to address practical problems from the difference between how we work, followed by financial institutions and economic characteristics and financial needs of low income families. For example, commercial banks need a stable source of income borrowers, from which principal and interest back to the agreed conditions may have been paid. However, the income from a large number of independent households are not stable, regardless of their size. A large number of small loans are needed to serve the poor, but the lenders prefer large loans in small amounts for administrative costs to a minimum to make. They have also been looking for security with a clear title - have not many of them low-income households. In addition to the bankers tend to view low-income households with a poor risk to extremely high costs of monitoring information from the company to impose.

Microcredit is a part of microfinance is the extension of very small loans (microloans) to people living in poverty has been designed to enhance entrepreneurship. These individuals lack collateral, steady job and a verifiable credit history and can not meet even the minimal qualifications to gain access to traditional credit.
Business model for the acquisition of financially viable

The last ten years show, however, a successful experience in financing small entrepreneurs and producers, the poor people, the response to the access and timely financial services at market rates, to repay their loans and the use of the product to improve their income and assets. This is not surprising, because the record only realistic alternative for them, from informal market at interest rates much higher than the market. Community banks, NGOs and local organizations of the savings and credit groups around the world have shown that it can micro-loans to be beneficial for borrowers and lenders, making it one of the micro-financing, the most effective strategies for reducing poverty .

To the extent that microfinance institutions are financially viable, self-sustaining, and an integral part of the communities in which they operate, they have the potential to win more resources and expand services for customers. Despite the success of microfinance institutions, only about 2% of the world population is estimated around 500 million small business owners have access to financial services.

The Grameen Bank, which is a synonym for microfinance, makes small loans to poor people without collateral. Founded in 1976, the Grameen Bank (GB) over 1,000 branches (a branch is made up of 25 to 30 villages, about 240 groups and 1200 borrowers) in every province with Bangladesh, the loan groups in 28,000 villages, 12 lakh borrowers more than 90% are women. It has an annual growth of 20% with respect to the borrower. The most important feature is the product of borrowing, as high as 98%. An interesting feature is the ingenious way of funding the loan with no "guarantee". The system of Grameen Bank loans is simple, but effective. The system of this bank is based on the idea that skills shortage is based not busy. A group of credit approach is applied to ensure the pressure of peer groups in order to follow through and make borrowers in carrying out financial transactions with strict discipline, and ultimately to develop a remedy to an improvement in borrowers with good credit ratings.

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