Max United Foundation

WHAT IS MICROFINANCE?

The definition of microfinance is “provision of thrift, credit, insurance, money transfer and other financial and banking services as products of very small amounts to the economically backward customers who get lack access to traditional financial services in rural, semi-urban and urban areas for enabling them to raise their income level and improving living standards.”

Microfinance is a process that involves the society at large with the aim of providing the poor with resources and confidence to manage their lifestyles and livelihoods on a sustainable basis. The micro finance program targets the poor people who are otherwise denied to access the formal credit system and so, risk dependence on the money lenders’. Under these circumstances, a non-formal agency for credit supply to the poor, in the form of self help groups emerged as a promising partner to the formal credit system.

The micro finance program is generally seen as small loans to poor people for self-employment projects that generate income allowing them to care for themselves and their families as well. It is also seen as an integral approach for poverty alleviation programs. However, the credit requirement of rural poor are determined by a complex, socio-economic situation and the dividing line between credit for consumption and productive purpose is blurred. Some of the consumption needs like expenditure towards health care, nutrition etc. contribute to improved productivity of individuals. The credit needs of the poor can also be equated with that of pre-micro-enterprises rather than micro-enterprises as their own labor and indigenous tools are the only capital they employ.

MICROFINANCE IN MAX UNITED

Inspired by Prof.Mohammed Yunus-who brought socio-economic reformation in Bangladesh, it was under the leadership of Sri. Jose A. Kuriakose initiated very small level microfinance activities at Ernakulum district, Kerala during the year 2015-16 with the help of Mr. Anish John K Provided small loans to some SHG groups and collects the amount on weekly basis. “Grameen” model were relevant during the initial year. As the initiative programme success grew in size they decided to start the activity in larger size as legally through an NGO. With the support and advice of Mr. Joseph Antony, Ex-LDM, Bank of Baroda and Elby Thomson, a Microfinance Expert. they established a new NGO/MFI at Kothamangalam in January 2017. Select JLG model of microfinance to the future expansion.

Why Max United Starts Microfinance?

Microfinance has proved to be one of the most powerful engines in the global effort to end the crushing poverty that deprives hundreds of millions of the world’s people of sustenance and hope.

It is based on the idea that if you give a poor person a very small loan for use in a self-employment venture, you will get an amazing return on your investment. The borrower will not only work to end their poverty, but they will also improve the life of their family and strengthen their community.

Microfinance programs have given many of the world's poorest people the opportunity to lift themselves out of poverty altogether. The increases in household income allow borrowers to provide greater quantities and more nutritious foods to their families, to educate their children and to improve their houses.

Here are nine benefits of microfinance:

Access Banks simply won’t extend loans to those with little or no assets, and generally don’t engage in the small size of loan typically associate with microfinancing. Microfinancing is based on the philosophy that even small amounts of credit can help end the cycle of poverty

Better loan repayment rates Microfinance tends to target women borrowers, who are statistically less likely to default on their loans than men. So these loans help empower women, and they are often safer investments for those loaning the funds.

Extending education Families receiving microfinancing are less likely to pull their children out of school for economic reasons.

Improved health and welfare Microfinancing can lead to improved access to clean water and better sanitation while also providing better access to health care.

Sustainability Even a small working capital loan of Rs 5000 can be enough to launch a small business in a developing country that could help the benefactor pull themselves and their family out of poverty.

Job creation Microfinancing can help create new employment opportunities, which has a beneficial impact on the local economy.

Empowering Unlike traditional charity, microfinance is an investment in individuals and communities who are working hard to break free from the cycle of poverty. Microfinance relies upon the entrepreneurial spirit of clients who are starting businesses, employing their neighbours and educating their children. Opportunity International believes that our clients, when equipped with the right resources, can work their way out of poverty. We simply provide them with the capital and skills they need to get started.

Sustainable When a client pays back a loan, that money is lent to someone else, extending the life and impact of each rupees. Opportunity International's loan repayment rate is 98% - so money is constantly recycled, multiplying the value of every rupees donated.

Successful Over our 40+ year history, we have seen clients' lives transformed because they were given access to financial tools and training. Children have been able to go to school. Farmers have received higher quality inputs, leading to increased yields. Mothers have been able to feed their families. Business owners have employed their neighbours. Individuals have transformed their communities. A small investment, a savings account or an insurance plan can be the spark for permanent transformation in the lives of those working their way out of poverty.

Characteristics of Microfinance

Growth of Microfinance Volume Worldwide

In 2017, the lending volume has reached gargantuan sizes in comparison with 2004. The diagram below shows the data from around 2000 institutions providing financial services. There are actually more than ten thousands microfinance institutions that lead one to think the global and Indian volume is even higher.

ROLE OF NGOs IN MICROFINANCE

Non-governmental Organizations (NGOs) are playing a vital role in rural reconstruction, agricultural development and rural development even during pre independent era in our country. In the post independent period the NGOs became a supplementary agency for the developmental activities of the government and in some cases they become alternative to the government. After the introduction of microfinance through Self-Help Groups (SHG), they penetrated into each and every corner in India and actually the NGOs are responsible for converting the pilot project of microfinance into a major programme and the NGOs are responsible for making the microfinance through SHG as the largest programme in the world. The study reported that NGOs are playing vital role in the formation of SHGs and motivating women to join the groups and linking the groups with the banks for microfinance.

Functioning of Microfinance Institutions

MAX UNITED MODEL MICROFINANCE

Max United are equipped with JLG Model Microfinance. This is a simple model of microfinance. Joint Liability Group is a concept established in India in 2014 by the rural development agency - National Bank for Agriculture and Rural Development- (NABARD) to provide institutional credit to small farmers.

Microfinance programs have given many of the world's poorest people the opportunity to lift themselves from their poverty altogether. The increase in household income allowsthe family of Women beneficiaries to provide greater quantities and more nutritious food to their families, to educate their children and to improve their houses.As families cross the poverty line and micro-businesses expand, their communities benefit. Jobs are being created, knowledge is shared, civic participation increases, and women are recognized as valuable members of their families and communities. In short women are respected and they become an integral part of both families and society.

Max United stands for the ‘wholistic’ empowerment of the poor and marginalized. Through the constant intervention with the society, we realized that the women socio economic empowerment of women is highly resulted on the process of poverty alleviation and through the same the families in the target group can achieve employment opportunities and via Financial Self-reliance. Among the villagers an earning male spends 25-40% of his income for himself but the women are bringing 95%-100% of their income to their respective family.

What is JLGs?

“A Joint Liability Group (JLG) is an informal group comprising of 4-10 individuals of same village/locality of homogenous nature and the same socio economic background who mutually come together to form a group for the purpose of availing bank / mfi loan without any collateral on individual basis or through group mechanism against mutual guarantee. “

General features of JLG

A Joint Liability Group (JLG) is an informal group comprising of 4-10 individuals coming together for the purpose of availing bank loan on individual basis or through group mechanism against mutual guarantee. Generally, the members of a JLG would engage in a similar type of economic activity in the Agriculture and Allied Sector. The members would offer a joint undertaking to the bank that enables them to avail loans. JLG members are expected to provide support to each other in carrying out occupational and social activities.

Specific features of JLGs

Members should have a common activity.
Members need not to have a land title.
Members should be of the same village.
Only One member of a family can become a member of JLGs.
Members should not be a defaulter of bank loan.
Member should hold regular meetings.

Criteria for Membership

Members should belong to similar socio-economic status, background and environment carrying out farming and Allied activities and who agree to function as a joint liability group. This way the groups would be homogeneous and organized by likeminded farmers/Individuals and develop mutual trust and respect.

The members should be residing in the same village / area / neighborhood and should know and trust each other well enough to take up joint liability for group/ individual Loans. Members who have defaulted to any other formal financial Institution, in the past, are debarred from the Group Membership. More than one person from the same family should not be included in the same JLG.

Group Approach

All members of the JLG should be active enough to assume leadership of the group to ensure the activities of the JLG. The selection of an effective / able / active leader for the JLG is essential as this will ultimately benefit all the JLG members. The leader fosters a sense of unity, oversees and maintains discipline, shares information and facilitates repayments. For the bank, he is the focal point for group activities.

The JLG should hold regular meetings which must be attended by all the members regularly to discuss issues of mutual interests.

Graphical Representation of JLG Hierarchy

Methodology for Microfinance Loan

A group is consisting of 5-7 members will form a JLG. The group formation will be done after a series of meeting with the people in their area. The first step is to contact the local leaders of the area to communicate about the program. Once they understood the concept, we do the criteria survey.

The loan officer will make house to house visits and ensure that the identified persons are fulfilling the norms laid out under JLG concept. The Loan Officer also makes it sure that the candidate is not a member of other S.H.Gs/JLGs or any other groups such as promoted by similar organizations. The identified members will be given an initial awareness on the JLG concept and its significance to enable the candidate to take a firsthand decision to proceed further or to withdraw or to postpone joining the JLG.......

Loan Procedure

For taking a loan from Max United the members should request the same to the JLG and if it is a genuine case the JLG will allow the member to get the loan application form from Loan Officer.....