{"id":14704,"date":"2020-08-12T17:46:35","date_gmt":"2020-08-12T12:16:35","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=14704"},"modified":"2020-08-13T11:58:54","modified_gmt":"2020-08-13T06:28:54","slug":"starting-a-microfinance-company-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/starting-a-microfinance-company-in-india\/","title":{"rendered":"Easy guidelines for starting a microfinance company in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Microfinance companies come under the category of financial institutions that render monetary aid to low-income groups. Since the launch of the RBI-driven financial inclusion program, the growth of the microfinance companies has been skyrocketed. These companies aim to provide hassle-free financial aid to the group of people who don\u2019t have access to renowned financial institutions for credit. If you are aiming to establish such a company then you are on the right page. This blog will provide you step by step guide on how to start a microfinance company in India.&nbsp; <\/p>\n\n\n\n<p>Apart from banks, only NBFCs\nare allowed to render financial services as per provisions of RBI. However, RBI\nhas embedded some provisions that encourage some private entities to perform\nfinancial activities under specified circumstances. There are two business\nmodels proposed by RBI that serve this purpose.<\/p>\n\n\n\n<ul><li> <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>Registered NBFCs<\/strong><\/a> under RBI<\/li><li>Section 8 Company<\/li><\/ul>\n\n\n\n<p> If you wish to run a microfinance company, choose one of the above business models as per your requirement. The following sections will explain how to <a href=\"https:\/\/corpbiz.io\/microfinance-company-registration\"><strong>register a microfinance company<\/strong><\/a> either as a section 8 company or NBFCs.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"695\" height=\"283\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-47.png\" alt=\"microfinance company in India\" class=\"wp-image-14705\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-47.png 695w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-47-300x122.png 300w\" sizes=\"(max-width: 695px) 100vw, 695px\" \/><\/figure><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/starting-a-microfinance-company-in-india\/#Registering_Microfinance_firm_as_an_NBFC\" >Registering Microfinance firm as an NBFC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/starting-a-microfinance-company-in-india\/#Registering_Microfinance_firm_as_a_Section_8_Company\" >Registering Microfinance firm as a Section 8 Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/starting-a-microfinance-company-in-india\/#Key_points_regarding_microfinance_companies\" >Key points regarding microfinance companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/starting-a-microfinance-company-in-india\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Registering_Microfinance_firm_as_an_NBFC\"><\/span>Registering Microfinance firm as an NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Here are guidelines to register Microfinance Company under the NBFC business model. <\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Register a company<\/h3>\n\n\n\n<p>To adopt the NBFC based business model, the applicant must form a public or private company in the first place. The registration criteria of either of the business model differ slightly from each other. A minimum of 2 members and a capital of 1 lac are required for the <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>private company registration<\/strong><\/a>. Meanwhile, in the case of a public company, a minimum of 7 members is required for the formation. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Accumulate capital<\/h3>\n\n\n\n<p>Every business needs funds to\nget established in a particular market, and microfinance companies are not an\nexception. Therefore, as per legal provisions, you need to procure a minimum of\nRs 5 crore as a net owner fund to establish such a business model.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Deposit the capital<\/h3>\n\n\n\n<p>After accumulating the\nspecified capital, make sure to transfer it to the bank in the form of a fixed\ndeposit. Do not forget to avail \u2018No lien\u2019 certificate from the bank for this\nfund. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Apply for license<\/h3>\n\n\n\n<p>This is the last step in the\nregistration process in which you need to file an online application and upload\nthe scanned copy of the document on the RBI portal. Furthermore, the applicant\nshould submit a hard copy of the same at RBI\u2019s regional office. List of documents\nthat go along with the application, are as follows:-<\/p>\n\n\n\n<ul><li>Memorandum of Association (MOM) and Articles of Association(AOA)<\/li><li>Certificate of the incorporation of the firm. <\/li><li>Copy of the Board resolution prepared in the board meeting. <\/li><li>Copy of Auditor\u2019s report displaying the fixed deposit receipt. <\/li><li>No Lien Certification issued by the bank stating the net owned fund. <\/li><li>A confidential report issued by the bank about the company.<\/li><li>Directors\u2019 credit reports (only latest ones)<\/li><li>Director\u2019s net worth certificate<\/li><li>Certificates displaying academic and professional background of the directors. <\/li><li>Director\u2019s income proof such as salary certificate, Wages, and tax statement.<\/li><li>Director\u2019s&nbsp; KYC<\/li><li>Structure plan showing parametric details of the organization<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/accounting-treatment-of-charitable-institutions-under-microfinance\/\">Accounting Treatment of Charitable Institutions under Microfinance<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Registering_Microfinance_firm_as_a_Section_8_Company\"><\/span>Registering Microfinance firm as a Section 8 Company<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 8 company is another form of business that an applicant can adopt to establish a microfinance company. Follow the given guidelines to register your company as a <a href=\"https:\/\/corpbiz.io\/section-8-company-registration\"><strong>section 8 company<\/strong><\/a>. In respect to simplifying the process of incorporating Section 8 companies on 7th June 2019 requirement of prior filling of INC-12 has been dispensed vide the Companies (Incorporation) <strong><em>Sixth Amendment Rules,2019<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Sixth_Amendment_to_the_United_States_Constitution\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Attachment of SPICe+<\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"586\" height=\"425\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-48.png\" alt=\"Attachment of SPICe+\" class=\"wp-image-14706\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-48.png 586w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-48-300x218.png 300w\" sizes=\"(max-width: 586px) 100vw, 586px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Apply for name availability DSC and DIN through SPICe+ form facility<\/h3>\n\n\n\n<p>DSC stands for Digital\nSignature Certificate. It is generally allotted to the directors and\nshareholders of the company to verified documents electronically. Meanwhile,\nDIN, aka Director Identification number allotted to the company\u2019s director, is\naccountable for day-to-day handling tasks. Keep in mind that DIN is an\neight-digit alphanumeric code that comes lifetime validity. <\/p>\n\n\n\n<p>For this purpose, the\napplicant must submit it to the MCA\u2019s website along with the requested\ndocuments. The inclusion of terms like Sanstha or microfinance in the company\u2019s\nname is a mandatory requirement here. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Draft AOA and MOA<\/h3>\n\n\n\n<p>The next step is to Draft the\nArticles of Association (AOA) &amp; Memorandum of Association (MOA) complying\nwith mandatory documentation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Filing of mandatory documents<\/h3>\n\n\n\n<p>This is the last phase of the\nregistration process in which the applicant has to files the following\ndocuments. Those are as follows:-<\/p>\n\n\n\n<ul><li>Identification\nproof of all directors\/promoters such as PAN card or other supporting\ndocuments. <\/li><li>Documents\nexhibiting proof regarding the address. <\/li><li>Directors\/promoters\nlatest colored photograph. <\/li><li>The\nlease agreement of the business premises.<\/li><li>Ownership\ncertificate of the business place. <\/li><li>NOC\nfrom the legal owner of the business place. <\/li><li>Applicable\nstamp duty.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_points_regarding_microfinance_companies\"><\/span>Key points regarding microfinance companies <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Registering the section 8\ncompany is relatively easier than the NBFC based business model. <\/li><li>The lending capabilities of\nsection 8 companies are lower than that of NBFC based microfinance firm. <\/li><li>Most of the microfinance\ncompanies provide collateral-free credit. <\/li><li>Microfinance firms typically\nserve the poor and unemployed people seeking financial aid. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is no denying that\ndocumentation is the core of any registration process. If you don\u2019t get it\nright, there is no way authority can approve your application, whether it\u2019s a\nquestion of obtaining a trade license or availing mandatory registration to run\nyour business. This notion is applied to the registration for microfinance\ncompanies as well. <\/p>\n\n\n\n<p>The arrangement of document for any registration process is sensitive affairs, and it should be addressed with a deliberate approach. Having said that, if you have some doubts about this topic, allow our experts to clear it for you. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/micro-finance-company-registration-process\/\">Micro Finance Company Registration: Complete Process<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Microfinance companies come under the category of financial institutions that render monetary aid to low-income groups. Since the launch of the RBI-driven financial inclusion program, the growth of the microfinance companies has been skyrocketed. These companies aim to provide hassle-free financial aid to the group of people who don\u2019t have access to renowned financial institutions [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":14711,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[507],"tags":[869],"acf":{"service_id":"52"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":7420,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14704"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=14704"}],"version-history":[{"count":10,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14704\/revisions"}],"predecessor-version":[{"id":14726,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14704\/revisions\/14726"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/14711"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=14704"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=14704"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=14704"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}