{"id":2462,"date":"2021-02-19T08:27:13","date_gmt":"2021-02-19T08:27:13","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2462"},"modified":"2021-02-22T10:52:07","modified_gmt":"2021-02-22T10:52:07","slug":"start-microfinance-company-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/","title":{"rendered":"Start Microfinance Company in India: A Complete Business Plan"},"content":{"rendered":"\n<p class=\"has-drop-cap\">For the\nprosperity and upliftment of the low and medium income level strata, finance\nand credit play a significant role in their lives. However, the majority\npopulation of this income strata does not have proper access to commercial\nbanks and loan houses. In this situation, the concept of Microfinance Company\ncame as a relief for these people, as they offer and credit on low interest. To\nstart Microfinance Company in India, one needs to obtain <strong><a href=\"https:\/\/swaritadvisors.com\/microfinance-company-registration\" class=\"text-primary\">Micro\nFinance Company Registration<\/a><\/strong> from RBI.<\/p>\n\n\n\n<p>In this blog, we will discuss in detail about the\nconcept and business plan to start microfinance company in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a74913d457\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a74913d457\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Concept_of_Microfinance_Company_in_India\" title=\"Concept of Microfinance Company in India\">Concept of Microfinance Company in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Who_can_take_Loans_from_Microfinance_Companies\" title=\"Who can take Loans from Microfinance Companies?\">Who can take Loans from Microfinance Companies?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Objectives_of_Microfinance_Company\" title=\"Objectives of Microfinance Company\">Objectives of Microfinance Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Benefits_of_Microfinance_Company\" title=\"Benefits of Microfinance Company\">Benefits of Microfinance Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Basic_Requirements_to_Start_Microfinance_Company_in_India\" title=\"Basic Requirements to Start Microfinance Company in India\">Basic Requirements to Start Microfinance Company in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Documents_Required_to_Start_Microfinance_Company_in_India\" title=\"Documents Required to Start Microfinance Company in India\">Documents Required to Start Microfinance Company in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Process_to_Start_Microfinance_Company_in_India\" title=\"Process to Start Microfinance Company in India\">Process to Start Microfinance Company in India<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Incorporate_a_Company\" title=\"Incorporate a Company\">Incorporate a Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Raise_the_Required_Capital\" title=\"Raise the Required Capital\">Raise the Required Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Open_a_Bank_Account\" title=\"Open a Bank Account\">Open a Bank Account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Apply_for_Registration_as_Microfinance_Company\" title=\"Apply for Registration as Microfinance Company\">Apply for Registration as Microfinance Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#File_Online_Application\" title=\"File Online Application\">File Online Application<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Furnish_the_Hard_Copy\" title=\"Furnish the Hard Copy\">Furnish the Hard Copy<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/blog\/start-microfinance-company-in-india\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Microfinance_Company_in_India\"><\/span>Concept of Microfinance Company in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term Microfinance Company or Microfinance\nInstitution means an <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFC<\/a><\/strong> that offers\nfinancial assistance to the low income group, in the form of Loan, Savings,\nInsurance, Credit, Money Transfer, Insurance, etc. Also, these companies\nprovide microcredits to borrowers.<\/p>\n\n\n\n<p>Further, the existence of microfinance companies is\nat a small scale in comparison to large NBFCs, as these institutions primarily\ndeal with low income, economically backward, and the rural sector of the\nsociety.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_can_take_Loans_from_Microfinance_Companies\"><\/span>Who can take Loans from Microfinance Companies?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The ones eligible to take loans and credit from\nMicrofinance Companies are as follows:<\/p>\n\n\n\n<ul><li>Small Scale Businesses;<\/li><li>Artisan Business;<\/li><li>Agricultural Activities;<\/li><li>Professional and Transport Trades;<\/li><\/ul>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/swaritadvisors.com\/blog\/different-ways-to-establish-micro-finance-company\/\">Different Ways to Establish Micro Finance Company<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Objectives_of_Microfinance_Company\"><\/span>Objectives of Microfinance Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main objectives of a Microfinance Company are as follows:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-offer-financial-assistance-1024x682.png\" alt=\"Objectives of Microfinance Company\" class=\"wp-image-2466\" width=\"523\" height=\"348\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-offer-financial-assistance-1024x682.png 1024w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-offer-financial-assistance-300x200.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-offer-financial-assistance-768x512.png 768w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-offer-financial-assistance.png 1300w\" sizes=\"(max-width: 523px) 100vw, 523px\" \/><\/figure><\/div>\n\n\n\n<ul><li>To offer\nfinancial assistance;<\/li><li>To increase\nwomen participation in generating sustainable livelihood;<\/li><li>To allow access\nto quality healthcare;<\/li><li>To make low\nincome strata self-reliant;<\/li><li>To increase the\nmode of livelihood;<\/li><li>To offer banking\nand financial services to small scale enterprise;<\/li><li>To assist low\nincome strata in becoming self-employed;<\/li><li>To provide\nfinancial assistance to the ones who are engaged in carpentry, fishing,\ntransportation, etc.;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_Microfinance_Company\"><\/span>Benefits of Microfinance Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The key benefits of a microfinance company are as follows:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-generate-job.png\" alt=\"Benefits of Microfinance Company\" class=\"wp-image-2467\" width=\"544\" height=\"198\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-generate-job.png 953w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-generate-job-300x109.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/To-generate-job-768x280.png 768w\" sizes=\"(max-width: 544px) 100vw, 544px\" \/><\/figure><\/div>\n\n\n\n<ul><li>To generate job\nprospects;<\/li><li>To fund for\nsustainable living;<\/li><li>To provide an opportunity\nfor saving, future investment, and children education;<\/li><li>To offer better\nloan repayment rate;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Basic_Requirements_to_Start_Microfinance_Company_in_India\"><\/span>Basic Requirements to Start Microfinance Company in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The basic requirements to start Microfinance Company\nin India are as follows:<\/p>\n\n\n\n<ul><li>Must have a registration under the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Companies_Act_2013\">Companies Act 2013<\/a> or the Companies Act 1956;<\/li><li>Need to maintain 85% of the total qualifying assets;<\/li><li>Must have prior approval from the Reserve Bank of India;<\/li><li>Should have Rs 5 crore as the Net Owned Fund (NOF). However, in the case of North Eastern State, the said limit has been decreased to Rs 2 crore;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Documents_Required_to_Start_Microfinance_Company_in_India\"><\/span>Documents Required to Start Microfinance Company in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The documents required to start Microfinance Company\nin India are as follows:<\/p>\n\n\n\n<ul><li>A copy of the\nIncorporation Certificate;<\/li><li>PAN Card details\nof the Applicant Company;<\/li><li>PAN Card details\nof the proposed Directors;<\/li><li>Digital\nSignature Certificates for Directors;<\/li><li>Director\nIdentification Number for Directors;<\/li><li>Latest Passport\nsized photographs for all the Proposed Director;<\/li><li>Address Proof of\nthe premise being used as Registered Office;<\/li><li>In the case of\nthe Rented Property, a copy of the Lease Agreement or Rent Agreement;<\/li><li>In the case of\nthe Owned Property, a copy of the Sale Deed<\/li><li>A copy of the Certified\nMemorandum of Association;<\/li><li>A copy of the\nCertified Articles of Association;<\/li><li>Banker\u2019s Report;<\/li><li>Copy of the\nBoard Resolution passed;<\/li><li>Auditors Report\nshowcasing the minimum NOF (Net Owned Funds);<\/li><li>Compliance\nCertificate from a Practising Chartered Accountant;<\/li><li>Structured\nBusiness of the Entity;<\/li><li>Financial Report\nconcerning Directors;<\/li><li>Income Proof of\nthe Directors and Key Managerial Personnel;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Process_to_Start_Microfinance_Company_in_India\"><\/span>Process to Start Microfinance Company in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The steps involved in the process to start\nMicrofinance Company in India: <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Incorporate_a_Company\"><\/span>Incorporate a Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>To start Microfinance Company in India, the\napplicant needs to first incorporate a company under the provisions of the Companies\nAct 2013. The same can either be a Private Limited Company or <strong><a href=\"https:\/\/swaritadvisors.com\/public-limited-company-registration\" class=\"text-primary\">Public\nLimited Company<\/a><\/strong>. <\/p>\n\n\n\n<p>Also, it shall be pertinent to state that the\nrequirement of having Rs 1 lakh as the Minimum Capital has now been removed by\nthe Ministry of Corporate Affairs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Raise_the_Required_Capital\"><\/span>Raise the Required Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Further, in the next step, the applicant needs to\nraise an amount of Rs 5 crore or Rs 2 crore (in case of the north eastern\nstate) as the authorised capital. The said required capital can only be raised\nby way of issuing the equity shares. That means the option of issuing\npreference share capital has clearly been ruled out.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Open_a_Bank_Account\"><\/span>Open a Bank Account<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the applicant needs to open a bank account for\nmaking a fixed deposit. The amount of the fixed deposit will be the one\nreceived by the company. <\/p>\n\n\n\n<p>After that, the respective bank will issue a\ncertificate of no lien to the applicant, which it needs to annex with the\napplication to submit the same with the Reserve Bank of India.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Apply_for_Registration_as_Microfinance_Company\"><\/span>Apply for Registration as Microfinance Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, to obtain the Microfinance Company\nregistration, the applicant needs to furnish the certified copies of the\nfollowing with the RBI:<\/p>\n\n\n\n<ul><li>Certificate of\nIncorporation;<\/li><li>Extract of the\nObject Clause as specified in MOA;<\/li><li>Fixed Deposit\nReceipt;<\/li><li>Banker\u2019s\nCertificate;<\/li><li>Banker\u2019s Report;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"File_Online_Application\"><\/span>File Online Application<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>To obtain Microfinance Company Registration, one\nneeds to file an application for the same with the Apex Bank, for which it will\nbe issued an ARN (Application Reference Number).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Furnish_the_Hard_Copy\"><\/span>Furnish the Hard Copy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the last and the final step, the applicant will\nneed to approach the Regional Office of the Apex Bank to furnish the Hard Copy\nof the Application Form. After that, the authorities designated by the RBI will\ncarry out the process of Due Diligence, and if got satisfied, then a\nCertificate of Commencement of Business will be issued by them to the\napplicant.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, Microfinance Institution is an NBFC that primarily deal with low income, economically backward, and the rural sector of the society. The main aim of this type of NBFC is to make the backward section self-reliant and to increase the mode of livelihood for them. To start Microfinance Company in India, one needs to first incorporate a company under the provisions of the Companies Act 2013 and thereafter need to comply with the requirements mentioned above.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/swaritadvisors.com\/blog\/major-risks-faced-by-micro-finance-company-in-india\/\">Major Risks Faced by Micro Finance Company in India<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For the prosperity and upliftment of the low and medium income level strata, finance and credit play a significant role in their lives. However, the majority population of this income strata does not have proper access to commercial banks and loan houses. In this situation, the concept of Microfinance Company came as a relief for [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2463,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[59,56],"tags":[405],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2462"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2462"}],"version-history":[{"count":15,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2462\/revisions"}],"predecessor-version":[{"id":2584,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2462\/revisions\/2584"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2463"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}