Page 325 - DMGT509_RURAL MARKETING

Rural Marketing

Notes 17.1 Legal and Regulatory Framework for the Microfinance
Institutions in India

Societies Registration Act, 1860

NGOs are mostly registered under the Societies Registration Act, 1860. Since these entities were
established as voluntary, not-for-profit development organizations, their microfinance activities
were also established under the same legal umbrella. Main purpose is:
1. Relief of poverty
2. Advancement of education
3. Advancement of religion
4. Purposes beneficial to the community or a section of the community.

Indian Trusts Act, 1882

Some MFIs are registered under the Indian Trust Act, 1882 either as public charitable trusts or as
private, determinable trusts with specified beneficiaries/members.

Not-for-profit Companies Registered under Section 25 of Companies Act, 1956

An organization given a license under Section 25 of the Companies Act, 1956 is allowed to be
some of the provisions of the Companies Act, 1956.

For companies that are already registered under the Companies Act, 1956, if the central
government is satisfied that the objects of that company are restricted to the promotion of
commerce, science, art, religion, charity or any other useful purpose; and the constitution of
such company provides for the application of funds or other income in promoting these objects
and prohibits payment of any dividend to its members, then it may allow such a company to
register under Section 25 of the Companies Act.

17.2 A Profile of Rural India

1. 350 million Below Poverty Line.
2. 95 % have no access to microfinance.

3. 56 % people still borrow from informal sources.
4. 70 % don’t have any deposit account.
5. 87 % no access to credit from formal sources.
6. Annual credit demand is about 70,000 crores.
7. 95 % of the households are without any kind of insurance.
8. Informally Microfinance has been in practice for ages.

Notes NGOs are mostly registered under the Societies Registration Act, 1860. Since these
entities were established as voluntary, not-for-profit development organizations, their
microfinance activities were also established under the same legal umbrella.

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