Category: Finance »

Determinants of cross-country mergers and acquisitions

The 21st-century corporate world has witnessed the phase of globalization. It has led to technological advancement and the removal of trade barriers across countries. This is important as the competitive advantages of different organizations differ in terms of availability of raw material, investment, technology and so on. Therefore, in order to ensure long term growth potential, organizations have started forming cross country mergers and acquisitions (M&A). In contrast to the domestic mergers, cross country mergers help businesses in realizing the scope of new market opportunities. This is evident from the rise in the volume of cross border M&A.

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Motivators and demotivators of online financial products

Financial products or financial instruments act as investments and securities developed to facilitate sellers and buyers with financial gains (Blankespoor, et al., 2013). Financial products are provided by financial institutions like;

  • credit card agencies
  • banks
  • insurance firms
  • government bodies and
  • stock brokers
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Credit risk faced by microfinance institutions (MFI) in India

The microfinance industry of India is a major enabler of financial inclusion in the country. It has also been a blessing for small scale industries which act as an important source of income for a significant population. However, microfinance institutions (MFI) are faced with many problems which restrict their potential. These issues, mainly associated with credit risk, are discussed here. Read more »

Difference between microfinance institutions and commercial banks in India

The financial sector in India has been formally serving the economic needs of its urban and rural populations for over three centuries. This sector comprises banking and non-banking network which is present in multiple layers to cater to specific and varied requirements of different customers. The major aim of this network is to mobilize the savings from households to the economy to promote development. The formal lending system includes commercial banks, microfinance institutions (MFIs’) and non-banking financial institutions (NBFC). Read more »

Challenges faced by the Indian microfinance industry

Poverty, a raging economic issue, exists in most of the developing countries. The actual reason for severe poverty lies in the inequality in income distribution, which is chronic in developing countries, especially in India. Agricultural sector still plays a major role in Indian economy, despite the remarkable progress made in the service and manufacturing sector in last two decades. According to Census 2011, still 50% of the Indian population depend on agriculture and allied activities and approximately 69% of India’s population is in rural areas. This population has been largely deprived of formal financial services leading to lackluster performance of the agricultural sector (Karthik, 2017). For this reason the concept of microfinance was introduced. The main aim of introducing Indian microfinance industry was financial inclusion of poorer and backward section of the society.

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Types of microfinance institutions in India

Microfinance organisation is not new to the financial market in India. Due to the overwhelming poverty in India, government gave special attention to the development of rural credit. Taking All India Rural Credit Survey report (1950) into account, it reconstructed the cooperative structure which included the partnership of state in cooperatives, establishment of Regional Rural Banks (RRB) and National Bank for Agriculture and Rural Development (NABARD). In India, Non Government Organisations (NGOs) played a pivotal role in the development of micro financial service. Furthermore, microfinance industry in India has witnessed a fast-paced growth in last two decades. In 2009, the total number of microfinance institutions in India was around 150 (Tripathi, 2014).

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Consequences of risk management faced by microfinance institutions (MFIs’) in India

Microfinance institutions (MFIs’) serve two major needs of the rural poor population in India. These twin needs are the financial and social support to fulfill their needs. One of the most critical salient features of the Indian microfinance industry is that most players operate on the lines of the Non-Government Organization (NGO) system (Mimo Finance, 2011). Therefore, they are still struggling with profit making. Also, these institutions do not give much importance to risk management in their operations. Due to this, they face problems such as default and delinquencies in their business.

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Operational risk management of microfinance institutions

Operational risk management in microfinance institutions are important in day to day operations to mitigate risks such as:

  • frauds,
  • delinquencies,
  • workforce turnover,
  • liquidity,
  • change in interest rates,
  • regulatory among a host of others.

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