Micro Finance Company Registration

Microfinance Company Registration

 

Microfinance Company means an entity that is engaged in providing financial assistance and help to rural people, low-income strata, and the backward and undeveloped section of the society

A Micro Finance Company or Institutions extends small funding support at competitive interest rate with flexible repayment options. The Micro Finance Institutions (MFIs) mainly cater to the individuals/organizations those are unable to borrow money from mainstream banks, NBFC or other financial institutions.

Micro Finance Company is a non-deposit taking Non-Banking Financial Companies (NBFC) that offers micro or small finance to low income groups and families with less income living in rural and urban areas

 

Need for Microfinance Companies

1. It provides financial assistance to enterprises that cannot place collateral
2. It encourages women entrepreneurship
3. It provides startups with much-needed support
4. It offers assistance even for nominal amounts which generally are funded as hand loans
5. It formalizes the process of lending and hence brings about discipline in borrowing by low-income groups. This prevents over-borrowing and reduces complications arising out of high future debts.

Types of Microfinance Company

1. Non-Banking Finance Companies (NBFC) duly registered with RBI
2. Section 8 Company (Companies formed under section 8 of the Companies Act 2013)

Perquisites for Obtaining MFC Registration (NBFC) in India

1. The company must have a registration under the provisions of the Companies Act 2013;
2. It should have the Net Owned Funds (NOF) of Rs 5 crores;
3. It is eligible to offer loan only between Rs 50 thousand to Rs 1.25 lakh;
4. Need to Furnish details concerning Promoters;
5. 85% of the Total NOF needs to be the Qualifying Assets;
6. Does not require any amount of minimum capital;

Features of Micro Finance Company

1. Loan offer to low income group
2. Collateral free loans
3. Shorter Repayment tenure
4. Not mandatory to be a member of any of the Self-Regulatory Organization (SRO) such as RBI, SEBI, NABARD, SIDBI or IRDA
5. 4% or less should be the difference between the interest rate charged
6. MFIs needs to be a member of Credit Information Companies (CIC)
7. MFIs shall demand processing charges from the customers not more than 1% of the loan amount

Documents Required for Registration Micro Finance Company

1. Duly filled application form with passport-sized photographs of all directors
2. KYC of directors and shareholders (Passport, Voter’s ID card, Driving License, Aadhar card, Utility Bills)
3. Income proof of directors and shareholders along with their PAN cards
4. Business address proof or rental agreement and Electricity Bill
5. NOC from the owner