Last updated: December 17th, 2019 5:03 PM

Micro Financing Scheme of NMDFC

National Minorities Development and Finance Corporation (NMDFC) has launched the Micro Financing Scheme to provide concessional finance to the minorities for self-employment or income generation activities. Under this Micro Financing Scheme, assistance in the form of loan will be provided to the economically weaker sections of minorities communities for starting income generation activities. In this article, we look Micro Financing Scheme of NMDFC in detail. Also, read about Micro Financing Scheme of NBCFDC

Purpose of Loan

The micro-credit can be availed by the members of weaker sections amongst the Minorities organized into Self Help Groups (SHGs) for augmenting income generation activities. The activity can be undertaken by the individual member of the SHGs or by the group. The list of income-generating activities are given below:

• Agriculture and allied activities
• Technical trades
• Small business
• Artisan and traditional occupations, and
• Transport and services sector

Eligibility Criteria

Individual The eligibility criteria of an individual to apply for Micro Financing scheme under NMDFC are listed below:

• The beneficiary should belong to the category of the minority community.
• The beneficiary family annual income should be up to Rs.6 lakhs for rural areas and urban areas.
• The beneficiary should be a regular member of any of the Self Help Groups(SHG).
• The beneficiary should not avail any financial assistance under the State Government, Central Government or Financial Institutions relating to income generation activities.

Note: Highest priority will be given to women and occupational groups belonging to the minority community. NGO The eligibility criteria of NGO for implementing the microfinance scheme under NMDFC are given below:

• The NGO should have been registered for at least 3 years, and it should have a good reputation in the area of its operation.
• The NGO implementing the Micro Financing Scheme should have the objective of serving the economic and social needs of the weaker sections of the society.
• The NGO should have basic financial management capability, organisation skills, professional competence and flexibility to implement the lending programme.
• The NGO should have a proper system of maintaining accounts, and the accounts statement should have been audited.
• The NGO should have experience in credit administration through Self Help Groups (SHGs) for at least six months, and its recovery performance rating of 90% and above has to be maintained.

Quantum of Loan

The loan details of microfinance scheme are tabulated below:

S.No	Particulars	Scheme Details	Revised Scheme Details
1.	Loan Amount Limit	Rs.1 lakhs per member of SHG. Rs.20 lakhs for a group of 20 members in SHG.	Rs.1.50 lakhs per SHG member. Rs.30 lakhs for a group of members in SHG.
2.	Rate of Interest charged from NGO/SCA by NMDFC	1% per annum	4% per annum for male beneficiaries. 1% per annum for women beneficiaries.
3.	Rate of Interest charged from SHG by SCA	7% per annum	10% per annum for male beneficiaries. 8% per annum for women beneficiaries.
4.	Rate of Interest charged from SHG or beneficiary	7% per annum	10% per annum for male beneficiaries. 8% per annum for women beneficiaries.
5.	Rate of Interest charged from NGO by NMDFC	1% per annum	4% per annum for male beneficiaries. 2% per annum for women beneficiaries.
6.	Rate of Interest charged by SCA from NGO	2% per annum	5% per annum for male beneficiaries. 3% per annum for women beneficiaries.
7.	Moratorium period	3 months	3 months
8.	Repayment period for the NGO/SCA	3 to 4 years	3 to 4 years
9.	Repayment period for the beneficiaries	3 years	3 years
10.	Utilization Period of finance for the NGO/SCA	1 month to 3 months	1 month to 3 months
11.	NMFDC share to the beneficiary, SCA, NGO	90:10	90:10

Pattern of Finance

• The loan will be provided up to 85% by the NMFDC, and 10% will be provided by the NGOs/ State Channelizing Agencies (SCAs), and the remaining 5% has to be contributed by the beneficiary. 

Security for Loan

The bank guarantee has to be provided as the security to grant fund under the micro-financing scheme with NMFDC. Otherwise, the loan released by NMFDC directly to the NGO is required to deposit a fixed amount, which is equal to 100% of the total sanctioned loan amount.

Repayment of Loan

• The NGO applying directly to NMDFC or SCA will repay the loan amount along with interest after the moratorium of three months from the date of disbursement of funds.
•  SCAs will make repayments to NMDFC for four years from the date of the utilization of the funds. The SCAs will repay the loan, including interest, on a quarterly basis.
• Terms and conditions of repayment of the loan will depend upon the nature of the project the beneficiary has adopted. 
• The NGO would submit post-dated cheques for the repayment of quarterly dues as specified in the sanction letter. These post-dated cheques will be kept by NMDFC/SCA only as security.
• On receipt of repayment from the NGO, the post-dated cheque of the respective quarter will be returned along with an acknowledgement of the fund so received. 

Procedure for Obtaining Loan

The NGO/SHG intending to implement Micro financing scheme through the State Channelising Agency (SCA) has to follow the below-mentioned procedure:

• The NGO/SHG seeking for microcredit may directly approach NMDFC or to the State Channelising Agency (SCA) of NMDFC in their respective State. 
• In case NGO applies to the SCA, the application should be submitted to the Managing Director of the State Channelising Agency in their respective State. Then the SCA would verify the application based on the guidelines of NMDFC. 
• In the case of NGO implementing the scheme and wants to obtain a loan directly from NMDFC, then they would apply directly to NMDFC in the prescribed application form.
• Once the application is received byNMDFC/SCA, feedback about the NGO from the Registrar of Co-operative Societies or other authority with whom the NGO is registered is obtained.
• On satisfaction of feedback about the NGO from the Registrar, the NMDFC would approve to avail micro financed by the NGO. In such a case, the NGO is required to submit copies of annual reports for the last three years along with the application.
• Based on the details provided by the NGO, concerned representative of NMDFC will visit the NGO and make a detailed report based on the inspection. 
• This report will be examined for implementation of NMDFC's Micro Finance Scheme by NGO. Further, its capacity to handle beneficiaries would also be examined while sanctioning loan by NMDFC.
• If any application submitted by the NGO along with further information will be examined by the concerned authority for sanction.
• The sanction letter would be issued to the NGO for the financial assistance including utilization period, repayment schedule, interest rate etc.

Note: The application form for the Micro Financing Scheme of NMDFC is reproduced below in the pdf format for quick reference.

Release and Utilization of Funds

• The funds sanctioned against the NGOs will be released in two instalments.
• The eligible NGO is required to submit the application in prescribed format along with general loan agreement for withdrawal of loan amount.
• The loan sanctioned for NGO can make the withdrawal of funds within the credit limit, which is valid for one year.
• Initially, the sanctioned loan amount has to be withdrawn within one month from the date of sanction unless the limit is extended by NMFDC. 
• Before the release of the fund, NMDFC should inform the sanction details to the members of the managing committee of the NGO and furnish the consent for availing loan and their commitment towards loan repayment.
• The NGO is required to send a monthly report on the utilization of fund in the prescribed format. The funds remaining un-utilized due to any reason has to be refunded on expiry of the utilization period specified in the sanction letter. In case of any delay in such refund, will carry interest at the rate of 8% per annum.
• The NGO is required to approach NMDFC for withdrawal of 2nd instalment along with utilization details of the 1st instalment.
• NMDFC would conduct the verification for the proper utilization of 1st instalment.
• On satisfaction of utilization of the 1st instalment by the NGO, the NMDFC would release the 2nd instalment.

Note: At any stage of implementation, if improper utilization of fund by the NGO is found, then the NMDFC would initiate the process of blacklisting the NGO and recollecting the funds.

Insurance Cover

The insurance cover needs to be obtained in respect of assets acquired by the beneficiaries out of loan advanced by NMDFC.

Books of Accounts

The SCA/NGO has to maintain separate accounts in respect of the funds provided by NMDFC. The SCAs should also inspect the beneficiaries of the NMDFC. Under Micro Ficheme and submit the quarterly progress report.