Abstract:
Micro finance may be defined as providing finance to the people who do not have access to the several financial institutions like banks. In other words, micro finance also known as micro credit is "banking the unbankables". The impact of poverty may not be the same in every region but in developing countries, the need is more pronounced. To cater to the needs of the poor people, the micro credit enterprises have come into being. The various aspects of the micro credit enterprises are revealed in the article below.
(i) Incidence:
The policy adopted by the micro credit enterprises is to provide loans to micro finance institutions, which are credit worthy without taking into consideration any region or area in particular. It exercises its reluctance in catering to the needs of the states, which are at high risk. As of May, 2007, the following were its areas of operation:
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Cambodia
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Bolivia
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Tajikistan
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Ecuador
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Peru
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Nigeria
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Azerbaijan
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Indonesia
(ii) Three levels of loan portfolio diversification policies of Micro credit enterprises:
With regard to loan diversification, the micro credit enterprises adopt the following policies:
(I) First policy:
The maximum loan amount, which the micro finance enterprises are entitled to provide to a micro finance institution is 10% of the total lending capacity of the Micro credit enterprises or USD$1 million.
(II) Second policy:
By 2008 end, the micro credit enterprises have decided that any isolated region will not be entitled to get more than 35% of the total loan portfolio, which is outstanding.
(III) Third policy:
For the period 2006 to 2007, Micro credit enterprises had decided that by 2007 end, not more than 40% of the loan portfolio( outstanding) shall be loaned to a single area and 30% was the maximum that could be loaned out in any other area.
(iii) Lending norms and eligibility criteria for availing financial assistance from Micro credit enterprises:
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MFIs or Micro finance institutions who have proved to be operationally self sufficient and have implemented several business plans.
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Women folk living on less than USD$1per day. The women should also belong to rural regions.
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Charitable contributions are not made for operating programs related to humanitarian relief, programs operated by the governments or for political programs. Overseas donations are also not made by the micro credit enterprises.
(iv) Beneficiaries:
Services of Micro credit enterprises are extended to the following groups of people:
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Media
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Guarantors
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Micro finance institutions
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Corporate partners
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Donors and foundation
