Microfinance companies (MFI) can be termed as a Non-Banking Financial Company (NBFC) which does not accept deposits. Microfinance institutions are renowned for providing financial support to populations with low income. It has been noticed that economically weaker sections of the society in rural and semi-urban regions turn to informal sources such as pawnbrokers and moneylenders for obtaining financial support. However, these channels are known for higher interest rates and also present possibilities for the borrower being under the burden of debt forever. The limited access and availability of traditional banking system distance people from the benefits of economic development of the nation.
Microfinance companies are also dedicated to the evaluation and review of supporting factors which could help in faster recovery of people from poverty. Microfinance institutions are also known for the benefits of self-employment for underprivileged individuals. Apart from the development of employment opportunities, microfinance institution are also invested in the training of economically weaker people in rural areas to improve their simple skills alongside empowering them for utilizing the available resources to generate income and increase employment rates.
COMPLYKART is the leading name in MFI Registration related services in India, our well-experienced professionals have been supporting comprehensively Entrepreneurs & Companies in acquiring hassle free MFI Registration. Our services cover expert Advisory, filing up the Application, preparing documents, getting requisite approvals from authorities, on behalf of entities located in all parts of India and abroad.
Some of the Qualifying factors of a Microfinance Company are as follows:
- The amount of money loaned should not exceed Rs.50, 000 in the first cycle and later goes up to Rs. 100,000 in the subsequent cycles.
- The total debt of a borrower should not exceed over Rs. 100, 000/-
- Loan can be extended along without collateral
- The income of the borrower in the rural area should be not exceed Rs.1 Lac and Rs. 1.60 Lack, which is different for different semi-urban areas.
Types of microfinance companies
Non-Profit making Organizations
This include Section 8 Companies, Cooperative Societies, Trusts. This type of MFI can be registered under different Laws. Section 8 Companies are registered under the registration as per Companies Act, 2013. The net worth requirement to register such establishments is zero which is not the case with profit organizations like MFIs.
Profit making Organizations (NBFC-MFIs)
These include NBFC MFIs that performs similar activities as a bank does but on a smaller level. MFIs function in the similar way as NFBC in giving out loans to people, providing banking facilities to the poor and needy people of the society.
Advantages of having a Microfinance Company:
- Easy to Register: It is very easy to register a Microfinance Institution rather than a NBFC and also need to follow less compliance.
- Easy Collection of Loans: Collection rate of loan given by MFIs are very high as compared to other lending companies like NBFC or Banks
- Promoting Entrepreneurship: These Institutions aim at providing the opportunity for the poor to earn income on a daily basis by financing them to start something of their own.
- Provide easy access to capital: Microfinance Institution provide easy access of capital to small business owners which increases the increasing demand of small amount.
- Less Compliances: A microfinance company is a less maintenance company as it does not require more compliances as required be made by other finance companies.
Procedures to Register Microfinance Institution
A microfinance company must be incorporated as a company having Equity Share Capital.
Manage the Net Worth
The basic requisite for registration of a microfinance company is net owned fund of around Rs. 5 (five) crores to be deposited in a Bank Account.
Application Filing with RBI
Obtain all the certified copies and submit application to the RBI for Microfinance Company Registration and get Company application Reference Number.
Once the Online application is filed, hard copy is also submitted with the regional office of RBI for due diligence.
The documents and application are examined and due diligence by RBI. Upon the favourable verification of the application and documents, RBI will issue a certificate of registration for Microfinance Institution.
Documents for having a microfinance company
- Certified copy of Certificate of Incorporation of company.
- Copy of MOA & AOA of the Company
- Board Resolution for Microfinance company registration
- Banker's Report
- Net owned fund (NOF) Certificate of the company
- Details of group/Associate/subsidiary/holding Companies and investment in other NBFC
- Professional and Educational qualification of Directors
How Complykart can help you?
Our services are aimed at achieving growth for clients. We can provide necessary guidance for understanding the registration process for a Microfinance company.
Competence is our strength:
We make every effort to stay updated with the rules and regulations issued by RBI for Microfinance Companies and other NBFCs. This enables us to deal with client’s needs effectively.
Always there for you:
The assurance of a dedicated workforce including support staff and managers can be a promising factor in the process for obtaining registration for a Microfinance company.
Dealing with the specifics:
Our services cater to every need of the client with the focus on making clients understand the specifics of microfinance company registration. We are more than happy to clarify your doubts as required.