Micro Financing Scheme of NMDFC in India – A Complete Guide

The Micro Financing Scheme in India was launched by the NMDFC (National Minorities Development and Finance Corporation) to deliver concessional finance to the minorities for self-employment or income-making activities. In this scheme, help in the form of loans will be offered to the economically weaker sections of minorities’ communities for commencing income-generating activities. In this write-up, we shall discuss the Micro Financing Scheme under the guidance of NBCFDC.

What is Microfinance?

It recognises a poor individual as extraordinary reservoirs of knowledge & energy and bring in people with limited incomes & give them the equipment to aid themselves. Microfinance is given to underprivileged people with the belief that providing a dole (philanthropy, charity, freebies, etc.) is not the solution to poverty.

Objective of Loan under Micro Financing Scheme of NHMDFC in India

The micro-credit can be obtained by the members of lower sections amongst the minorities organised into SHGs (Self Help Groups) for increasing income generation activities. The activity can be initiated by the individual member of the Self Help Groups or by the group. Following is the list of income-generating activities:

1. Small Business;
2. Transport and Services Sector;
3. Technical Trades;
4. Traditional and Artisans Occupations;
5. Agricultural and Allied Activities.

Eligibility Criteria to get the loan under Micro Financing Scheme of NMDFC in India

• For Individual: The criteria of an individual to apply for this scheme under NMDFC is given below:
  1. The family of beneficiary yearly income should be Rs. 6 lakhs for rural and urban areas;
  2. The beneficiary should not avail any financial help under the Central Government, State Government, or Financial Institutions concerning income generation activities;
  3. The beneficiary should belong to the group of the minority community;
  4. The beneficiary should be a usual member of any of the SHGs.
• For NGO: Following is the criteria of NGO for executing the Micro Financing Scheme under NMDFC:
  1. The NGO should have an appropriate system of regulation accounts, and the account statement should have been inspected;
  2. The NGO executing the Micro Financing Scheme should have the aim of serving the social & economic needs of the weaker areas of the society;
  3. The NGO should have experience in credit administration via SHGs for six months at least, and its recovery performance ratio of 90% & above has to be maintained;
  4. The NGO must have essential financial management ability, professional capability, organisational skill & flexibility to execute the lending programme;
  5. The NGO must have been incorporated for at least three years, and it should have a good reputation in its operation area.

Details of Loan

You can check the details of loans under the Micro Financing Scheme from the table mentioned below:

What is the Procedure to Get Loan under the Micro Financing Scheme of NMDFC in India?

The SHG or NGO aiming to execute Micro Financing Scheme via the SCA (State Channelizing Agency) has to follow the procedure as mentioned below:

1. The SHG or NGO looking for micro-credit may directly approach NMDFC or the SCA in their respective state;
2. In case the NGO applies to the State Channelizing Agency, the application must be submitted to the Managing Director of the SCA in their respective state. Then the State Channelizing Agency would examine the application as per the guidelines of NMDFC^[1];
3. If the NGO implementing the scheme and wishes to get a loan from NMDFC, they have to apply directly to NMDFC in the prescribed form;
4. Once the application for a loan is received by SCA or NMDFC, feedback regarding the NGO from the Registrar of Cooperative Societies or other authority with whom the Non-Governmental Organisation is registered;
5. On fulfilment of feedback regarding the NGO from the Registrar, the NMDFC would consent to get Micro Financed by the NGO. In such a situation, the NGO have to submit copies of yearly reports for the past three years with the application;
6. Based on the information given by the NGO, the concerned representative of NMDFC will go to the NGO and make an informative report based on the examination;
7. This report will be inspected for implementation of the Micro Financing Scheme of NMDFC by an NGO. Moreover, its capacity to handle beneficiaries would also be inspected while sanctioning loan by National Minorities Development and Finance Corporation;
8. If an application form submitted by the NGO with more information will be inspected by the relevant authority for sanction;
9. The sanction letter would be granted to the NGO for the financial support comprising repayment schedule, utilisation period, rate of interest, etc.

Loan Repayment

• The NGO applying for a loan directly to National Minorities Development and Finance Corporation or SCA will repay the amount of loan with the interest rate after the moratorium of 3 months from the disbursement of funds’ date;
• State Channelizing Agency will make repayments to NMDFC for 4 years from the date of funds’ utilisation. The State Channelizing Agencies will repay the loan along with interest on a quarterly basis;
• T&C of loan repayment will depend on the project nature the beneficiary has adopted;
• The NGO would provide post-dated cheques for the quarterly repayment dues as stated in the sanction letter. These cheques will be kept by State Channelizing Agency or NMDFC only as security;
• On receipt of loan repayment from the NGO, the post-dated cheque of the respective quarter will be returned with an acknowledgement of the funds so received.

Conclusion

The bank promise has to be provided as the security to permit funds under the Micro Financing Scheme with the National Minorities Development and Finance Corporation (NMDFC). Otherwise, the loan released by NMFDC directly to the NGO is required to deposit a fixed amount, which is equivalent to 100% of the total sanctioned loan amount.

Read our article:Documents for Registering Microfinance Company in India – Overview