Understanding Micro Banking Requirements of Jharkhand
Micro banking is the branch of microfinance provides a broad package of financial inclusion products and business development services to the socially and economically challenged. All the needs of customers are catered through different microfinance models who are having difficulties in accessing banking functions. The micro banks basically cater the needs of semi urban and rural areas having population upto 10000. Most of the micro banking institutions in India attempt to go beyond savings and credit groups to provide microfinance services in the form of savings and insurance. There is a need of micro banking services because
● Provides financial assistance to entrepreneur without any collateral.
● It encourages women entrepreneurship.
● It offers assistance even for nominal amounts which generally are funded as hand loans.
● It formalizes the process of lending and hence brings about discipline in borrowing by low-income groups.
Requirements to be Micro Bank
● Should be registered under Companies Act 2013 with Reserve Bank of India.
● Minimum capital requirement of Rs. 5 crores.
● Should cater the needs of low and marginal income groups.
● To form a public entity, 7 members are required and to form a private entity, 2 members are required.
● Should submit Memorandum of Association and Articles of Association and shall file all the relevant documents along with it.
Type of Services:
1. Micro loan: Micro Finance loans are significant as these are provided to borrowers with no collateral. The end result of micro loans should be to have its recipients outgrow smaller loans and be ready for traditional bank loans.
2. Micro Savings: Micro savings accounts allow entrepreneurs to operate savings accounts with no minimum balance. These accounts help users inculcate financial discipline and develop an interest in saving for the future.
3. Micro Insurance: Micro insurance is a type of coverage provided to borrowers of micro loans. These insurance plans have lower premiums than traditional insurance policies.
Models of Micro Banking Practices:
1. The SHG- Bank Linkage Model: Under this model, SHG had proved their efficacy overtime but they suffer from a meager resource base which handicapped their capacity to expand the economic activities of their members. The factors received by the SHG members were the lack of information, time-consuming and expensive procedures for obtaining bank loans, rigid lending policies of the banks in respect of unit costs, unit sizes and group guarantee for loans.
2. Grameen Model: Potential clients are asked by the MFO to organize themselves into 'groups' of five members which are in turn organized into centres of around five to seven such groups. The loans for productive purposes are provided by the MFO directly to the members of small groups on the strength of group insurance.
3. Co-operative Model: This model has relied upon a 'credit union' involving the saving first strategy. It has built up a network of Women Thrift Groups (WTGs) and Men Thrift Groups (MTGs). They are registered under Mutually Aided Co-operated Society Act (MACs) and mobilize savings resources from the members and access outside/supplementary resources from the individual system.
In Jharkhand a total of 231 micro bank branches are operating spreaded over 23 districts. There has been growth rate of 8.20 percent per annum of micro banks in Jharkhand. In the recent years there has been promotion of entrepreneurship programmes and self employment which has lead the emergence of more micro banks so entrepreneur can get fast delivery of credit without any ambiguities. There is a lot of potential of micro banks in Jharkhand as there are many poor financial background entrepreneurs who could not avail credit from scheduled commercial banks due to lack of collateral and papers.
Credit requirements of the rural poor are diverse and their requirements of credit are unlimited because they need credit for different purposes i.e. credit as working capital, fixed capital and consumption credit etc. But the sources available are limited and coverage is scanty. So to fulfil such credit demand of these rural and semi urban people, the mechanism of micro banking system has paved the way to fulfil the credit and banking services to customers and avail timely credit. Over the years the impact of micro banking over Jharkhand created timely delivery of credits and financial inclusion of most of the rural and semi urban population.