Microfinance Company:

A microfinance company refers to an arrays of financial services, including loans, savings, and insurance, available to poor entrepreneurs and small business owners who have no collateral and wouldn't otherwise qualify for a standard bank loans.

A Microfinance Company (which is also known as a micro finance institution) is a type of no deposit taking NBFC (other than a Section­8 company), which deals with low amounts of financing to people with low incomes and located especially in rural and sub­urban regions. The micro finance companies are also regulated by the RBI Act of 1934

This section gives concise information regarding what is micro­finance company, to help our site visitors of India and abroad. The section below give enlightening information about the registration procedure for starting a micro finance company anywhere in entire India, including the documents required for this purpose. In India, the micro­finance companies (MFCs) are entitled to provide loans up to INR 50,000 individuals coming under low income group and residing in rural and semi urban areas (where not easily accessible are regular banking facilities) of the country, such as small businessmen, farmers, agriculturists and horticulturists, etc., without demanding any collateral or marginal money. Such micro­finance institutions (MFIs) take only the reasonable rates of interest recommended by the central government and RBI.

Also, these companies offer many lavish facilities to the borrowers regarding repayment. Generally, about 70% of the loan is provided for the purpose of income generation. Thus, these financing institutions are surely a great supporter to rural development, employment, and income generation.

● The process of a microfinance company registration can broadly be divided into two categories:

● Registration of a new public limited company.

● Getting approval of the Reserve Bank of India (RBI)

● For business operations as microfinance company above mentioned two requirements for such a registration.

● It may also be noted that a MFC should have the membership of (CIBIL) Credit Information Bureau India Limited.

● A micro finance company (NBFC­MFI) must have a minimum net owned fund of INR-05Crore, after its incorporation as a public limited company holding equity share capital, (and not the preference share capital).

● For North East India, this NOF has been kept at INR 2 Crore only. This amount is to be deposited in a freshly opened new bank account as a fixed deposit, free from all aliens.

● Then, a proper application is to be made to the RBI through the prescribed form for NBFC­MFI, together with submitting the documents mentioned below

● On receipt of the application and documents, RBI will examine those and will conduct due diligence, and thereafter, will issue the certificate of commencement of business as an MFC.

● Company Name reservation.

● Trademark search for business.

● Drafting MOA & AOA & Filling.

● MCA Government Fees & Filling.

● Corporate Identification Number (CIN).

● PAN No. of company.

● Name Approval from RBI.

● Micro finance Company Registration.

● Micro Finance Business Plan.

● Micro Finance License from RBI.

● Certified copy of Incorporation Certificate.

● Certified copy of Memorandum of Association of the Company.

● Certified copy of Article of Association of the Company.

● Banker's Report.

● Auditors report about receipt of minimum net owned fund.

● A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Performa Balance Sheet.