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What does Micro Finance Company mean?

Microfinance Company refers to the Company which facilitates low income group by providing funds to those who are distantly located especially in semi urban as well as rural areas and have no access to banking facilities. In other words, it can be considered as borrowing of funds by people found in semi urban as well as rural areas. It is worth noting here that it is considered as Non Deposit Taking NBFC but is different from Section 8 Company. RBI Act 1934 governs Microfinance Company for its smooth functions. It means the guidelines and directions for Microfinance institutions are laid out by RBI Act 1934. Microfinance Companies are synonymously called Microfinance institutions too.

Purpose of Micro Finance Company

  • It provides funds to low income people.
  • It comes handy for those people who reside in semi urban as well as rural areas.
Purpose of Micro Finance Company

Benefits of Microfinance Company

Microfinance Company offers many benefits which are given below –

  • There is no collateral/mortgage money required for borrowing of funds
  • It helps to generate employment
  • Facilitates rural development
  • It also provides an opportunity to earn income
Benefits of Microfinance Company

Limitations of Microfinance Company

Upto INR 50,000 loan can be provided by Microfinance Company to people who have no access to regular banking facility. People like agriculturists, businessman, farmers and so on usually avail facilities of Microfinance Company. As already specified, it is mostly availed by low income group. Moreover, people who are located in far flung areas like semi urban as well as rural areas can approach Microfinance Company.

Requirements to start Microfinance Company

One must comply with following requirements to start Microfinance Institutions-

  • Companies Act 2013 or 1956 helps in incorporation of Microfinance institutions
  • The Authority prescribes the minimum net worth which is necessary to carry out the operations of Microfinance institutions
  • The required Permit/License must be obtained

Pre-requisites for Microfinance Company Registration

There are certain pre-requisites for Microfinance Company Registration which are required and are given below-

  • Certification of Incorporation’s copy is required
  • Extract of main object clause specified in MOA’s copy is required
  • Fixed Deposit Receipt’s copy is required
  • Banker’s Certificate in regards to Net Owned Fund and Banker’s Report are required too

Microfinance Company Registration and its process

Registration of Company- A Microfinance Company needs to be registered as a Public Limited Company or Private Limited Company which is a preliminary step. It is in accordance with Companies Act, 2013. The Company needs to be registered initially with INR 1, 00, 000 towards capital followed by a next step where capital is raised.

Capital is raised- Authorized as well as Paid Up capital is raised in this step. The amount of INR 2 crore or 5 crore is decided on the basis of the case. The amount that is raised in this step can be only through Equity Share Capital. The capital can’t be raised through Preferential Share Capital which means a possibility of raising capital through Preferential Share is ruled out followed by a next step where the account is opened in the bank.

Account opening in the bank- Once the company is incorporated, Fixed Deposit has to be opened with the bank. The Fixed Deposit’s amount will be the one which is received by the Company. Subsequently, the bank provides Certificate of no lien which must be accompanied with an Application. After attaching Certificate of lien and an Application, it must be submitted to RBI followed by a next step where Microfinance Company registers itself with RBI.

RBI Registration of Microfinance Company- In this step, RBI needs the certified copies of the documents like Certification of Incorporation, extract of main object clause specified in MOA, Fixed Deposit Receipt, Banker’s Certificate as well as Banker’s Report. It is done so that Microfinance Company can carry out its business operations followed by filing an Application online.

Online Application Filing- One must submit an online Application with RBI basis which Company Application Reference Number will be allotted to the Company followed by the last step of hard copy submission.

Submission of hard copy- In the last step, one must approach Regional Office of RBI to submit an Application’s hard copy. Thereafter, Due Diligence will be carried out by RBI and if RBI satisfies itself, Certificate of commencement of business will be issued by it.

Microfinance Company Registration and process

Requirement of documents for Microfinance institution Registration

There are few documents which are required to be furnished for Microfinance institution Registration which are as follows-

All Directors and shareholders are required to furnish the following details-

  • Company’s Incorporation Certificate (copy)
  • Company’s MOA as well AOA (copy)
  • Bank Resolution which states proposed Microfinance Company Registration
  • Report from the bank
  • Report from Auditors which states minimum Net Owned Fund of an applicant of Company
  • Chartered Accountant’s Certificate that depicts information related to Group/Subsidiary/Holding/Associate Companies. Performa Balance Sheet is also furnished which states information about investment in other NBFC
  • Proposed Directors highest educational and professional qualifications (certified copy)

How can we help you to ease the process of Microfinance Company Registration?

Swarit Advisors is a one-stop service provider that can help you in enabling Microfinance Company Registration. Our team of professionals will guide you throughout the Microfinance Company Registration. You just have to provide us with all your essential documents to obtain Microfinance Company Registration and rest assured we will sail you through.  We aim to strengthen the bond with our clients by giving quality services rather than focusing on gaining monetary benefits. Thus, avail our services for a hassle-free Microfinance Company Registration.

Why choose Swarit Advisors?

- 20+ years of experience

- Rank 1 in NBFC & Financial Advisory services

- 150+ team of CA/CS/Lawyers

- 4.8 star rating from our clients

- 500+ cities served

- In case of any questions or you wish to apply for Microfinance Company Registration

Frequently Asked Questions (FAQs)

Microfinance Company refers to the Company which facilitates low income group which are distantly located especially in semi urban as well as rural areas and have no access to banking facilities by providing funds to them.

Microfinance Company offers funds to low income people and comes handy for those people who reside in semi urban as well as rural areas.

Microfinance Company offers many benefits like there is no collateral/mortgage money required for borrowing of funds, generates employment, facilitates rural development and so on.

The pre- requisites for Microfinance Company Registration includes Certification of Incorporation’s copy, extract of main object clause specified in MOA’s copy is required, Fixed Deposit Receipt’s copy, Banker’s Certificate in regards to Net Owned Fund and Banker’s Report.

Upto INR 50,000 loan can be provided by Microfinance institution to people who have no access to regular banking facility.

People like agriculturists, businessman, farmers and so on usually avail facilities of Microfinance Company. It is mostly availed by low income group.

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