Micro-Finance Company Registration
WHAT IS A MICRO-FINANCE COMPANY AND HOW CAN YOU SETUP A MICRO-FINANCE COMPANY?
A class of financial services known as microfinance caters to people and small enterprises without access to traditional banking and related services.
Microfinance covers, among other things, payment systems, savings and checking accounts, microinsurance, and microcredit, which gives small loans to underprivileged customers.
Microfinance services are intended to assist socially or geographically isolated or excluded consumers, who are typically lower population segments, in becoming self-sufficient
There are two ways of registering a micro-finance company in India:-
A microfinance company can be registered as;
- a section 8 company,
- and also as an NBFC in India.
The process of registering a microfinance company as a section 8 company is as-
- Get DSC ready and submit it for name approval:
Making applications for both “DSC and DIN” is the first stage. This takes a day or two. It is utilized for electronically signing documents submitted to the ROC in order to incorporate a company. Physical documents are not permitted to use “DSC.” The company incorporation process requires a DSC because the company registration process is entirely online. After that, you must submit a name approval request. The Central Registration Center will process name applications submitted through RUN (CRC). The CRC will conduct a thorough review of the name approval before communicating its approval or rejection to the applicant through email. The name must be distinctive and end with terms like “foundation,” “Sanstha,” etc. Additionally, a total of six names may be submitted at once.
- Apply for a Director Identification Number (DIN):
A Director Identification Number is a special number granted to current directors of incorporated companies. Any person who is going to be appointed as a director of a company, as well as any director who is currently serving on the board, receives this identification number from the central government. The director can use the same DIN number for life after receiving it, regardless of the company in which they are employed. The DIN number remains unchanged even if the company changes.
- Certificate of Incorporation:
The third step is to submit the required paperwork and the “Certificate of Incorporation” to the appropriate authorities. The form is combined with all the required attachments, including declarations, MOAs, and AOAs. Due to the fact that “Stamp Duty” is a state matter, the corporation must pay it regardless of the capital amount. Once the company is incorporated, you can start the microfinance business in India. But keep in mind that section 8 prohibits you from accepting any deposits. Apply for PAN and TAN right away after that because you need both to open a bank account.
The procedures for registering a micro-finance firm through an NBFC are as follows:
- Register a company:
Forming a private or public company is the first step in becoming registered as an NBFC microfinance company. A private company must have a minimum of two members and a capital of Rs 1 lakh. A public company must have a minimum of 7 members.
- Raise capital:
Forming a private or public company is the first stage in becoming registered as an NBFC microfinance company. A private business must have a minimum of two members and a capital of Rs 1 lakh. A public business must have a minimum of 7 members.
- Deposit the capital:
After raising capital, the next step is to deposit it as a fixed deposit in a bank and secure a “No Lien” certificate.
- Apply for a license:
The NBFC must then complete an online license application and submit it together with all of the certified documentation. The Reserve Bank of India’s regional office must also receive a paper copy of the application and license. The following documents must be in hand with the NBFC at the time of filing:
- Articles of Association and the Memorandum of Association
- Certificate of Incorporation
- Copy of the board resolution
- a copy of the auditor’s report detailing the receipt of a fixed deposit
- The net owned fund is shown in the banker’s certificate of no lien.
- Banker’s assessment of the business
- current directors’ credit report
- Certificate of Directors’ Net Worth
- Education/professional qualification evidence that the director
- The director’s KYC and income documentation
- proof of employment history
- Structure plan of the organization
FAQ's
The microfinance sector in India has more than 3000 MGIs, NGOs, and NGO-MFIs spread out over the country.
The different types of institutions that provide microfinance in India are Commercial banks. Credit unions. Non-governmental organizations (NGOs).
Any selected customer group may be granted a loan to use as startup money for their microbusiness or other income-generating ventures in an effort to improve their standard of living.
Microfinance can give women to increase their income generation, loans for homegrown entrepreneurs, emergency medical loans, home improvement loans, and home extensions/ business improvement loans.
For those who reside in far-flung villages around the nation, microfinance is an alternative to banking.
The services provided by banks are supplemented by microfinance organizations. Financial services like insurance, savings, and remittance are additionally offered in addition to microcredit.
Yes, it is allowed.
A private business must have a minimum of two members and a capital of Rs 1 lakh. A public business must have a minimum of 7 members. Raise money: Raising the necessary minimum net owned funds of Rs. 5 crore is the next phase.
He should not have a history of defaulting in any organization. He must meet the qualifying requirements set forth by the Reserve Bank of India (RBI) and the Microfinance Institutions Network (MFIN), including total debt, annual household income, and other requirements.
Microfinance called Village Financial Services launched its operations in FY15–16. The lender provides people from economically disadvantaged groups in society with lending options for a range of needs. The lender offers a variety of loans, such as the Sri Briddhi Loan, SME Loan, and others.
Microfinance is a banking service that gives unemployed or low-income people or groups access to financial services that they would not otherwise have. People can obtain acceptable small business loans through microfinance in a secure manner that adheres to moral lending principles.
Equitas Small Finance, ESAF Microfinance and Investments (P) Ltd, Fusion Microfinance Pvt Ltd, Annapurna Microfinance Pvt Ltd, and Arohan Financial Services Limited are some examples of the microfinance company.
It is completely legal if it meets all the requirements of RBI.
You can register a microfinance company in 2 ways:- i) as a section 8 company ii) as an NBFC
Equitas Small Finance is among the top microfinance company.
For starting a microfinance company, you need to register it with RBI by submitting all the required documents.
You can take the help of any financial consultancy firm.
