{"id":23225,"date":"2019-08-20T12:47:15","date_gmt":"2019-08-20T07:17:15","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=23225"},"modified":"2021-01-28T15:14:42","modified_gmt":"2021-01-28T09:44:42","slug":"how-to-start-a-mfi-in-india","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/how-to-start-a-mfi-in-india\/","title":{"rendered":"How to Establish an MFI in India?"},"content":{"rendered":"

Microfinance companies are also known as micro-lender or micro- creditors. Mainly conventional banks provide loans to entrepreneurs and to small businesses, but when entrepreneurs unable to match the loan criteria of banks microfinance companies<\/a><\/strong> provide financial credit to them. It’s the main practice of microfinance lender’s to provide a small sum of money to those who want to start a small business. MFI in India<\/strong> can be registered as a section 8 company or it can also be registered as NBFC<\/a> (Non-Banking Financial Company). <\/p>\n\n\n\n

Introduction on MFI in India <\/h2>\n\n\n\n

Microfinance Company is a source of financial services for entrepreneurs and small businesses, a type of NBFC which is in a business of micro credit finance to individual and small business. It is also known as Micro Finance Institution (MFI).<\/p>\n\n\n\n

Generally, these finance companies also provide loan up to Rs. 50,000 primarily where other banking facilities are not accessible. <\/p>\n\n\n\n

There are two types of business models doing business in micro -finance activities:<\/strong><\/em><\/p>\n\n\n\n

  1. NBFC-MFI<\/li>
  2. NGO’S, Trust, Society, and Section 8 company<\/li><\/ol>\n\n\n\n

    Why Start MFI in India?<\/h2>\n\n\n\n

    Any investor or entrepreneur who is interested in owning a bank, but due to difficult capitalization norms, is unable to meet the requirement for obtaining bank license, can set up a MFI in india. The requirement of starting a micro finance company is too less than a standard bank. This business is an excellent option for those who understand the power of lending money. A person can lend money to a person when they need most without doing any charity. <\/p>\n\n\n\n

    Starting micro finance can be risky too, but if proper diligence is processed before investing or lending money, likely no loss can occur. After proper market<\/a> research and checking the existing competition, weaknesses and strengths of the market can be carried out. By which mistakes can be avoided and one can establish much-preferred micro finance company.<\/p>\n\n\n\n

    Mode of MFI Registration  <\/h2>\n\n\n\n

    In case of Section 8 Company and NBFC, below mentioned capital is required:<\/p>\n\n\n\n

    1. Section 8 Company – No minimum capital <\/li>
    2. NBFC – Minimum 5 Crore <\/li><\/ol>\n\n\n\n

      MFI Registration through Section 8 Company<\/strong><\/h3>\n\n\n\n

      An NGO can be registered in the form of Trust, Society, or Section 8 company of the companies Act, 2013. Companies registered under section 8 are governed by the Ministry of Corporate Affairs, subsequently; trust and societies are governed by state govt. acts and regulations.<\/p>\n\n\n\n

      For Section 8 Company Registration, following are the basic requirements:<\/strong><\/p>\n\n\n\n

      1. Minimum two persons are required<\/li>
      2. Documents Required –
        1. Latest two passport size photographs of Director\/Promoters<\/li>
        2. PAN card copy of all Director\/Promoters <\/li>
        3. Voter ID\/Adhaar card \/passport for an identity passport<\/li>
        4. Bank statement, electricity bill\/water bill for address proof, but should not be older than 2 months <\/li>
        5. Ownership Documents of Registered office<\/li>
        6. Rent \/lease agreement <\/li>
        7. Electricity Bill (Not more than 2 months old)<\/li><\/ol><\/li><\/ol>\n\n\n\n

          The Section 8 Company registration process is as follows:<\/strong><\/p>\n\n\n\n

          Apply for Digital Signature Certificate<\/h3>\n\n\n\n

          A digital certificate is a secure\ndigital key that is issued by the certifying authorities for the purpose of\nvalidating and certifying the identity of the person holding this\ncertificate.  Digital signature makes use\nof the public key encryption to create the signature. eMudra is one of the\ncertified authority  which issue the\ndigital signature certificate. <\/p>\n\n\n\n

          National Informatics centre, Code\nSolutions, safescrypt, and Indian Institute of development and Research in\nbanking technology are other certifying authorities.<\/p>\n\n\n\n

          Request for Name Approval<\/h3>\n\n\n\n

          For name approval, the application for name availability of section 8 companies has to be made in Reserve Unique Name (RUN) Facility.<\/strong>  A company whose name is approved as per the rule of RUN is valid for 20 days from the date of name approval and 60 days from the date of approval in case existing company changing its name. The name in this field shall end up with Sanstha, foundation etc. <\/p>\n\n\n\n

          File SPICe Form<\/h3>\n\n\n\n