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Importance of credit risk in micro finance institutions

Micro finance institutions operate in the Indian economy with the ultimate objective to serve the financially poor section of the society. This is done by providing them with financial support and credit services (Lyuirika, 2010). However, their objective of financial stability and their long term viability can’t be overlooked. Very often, the task of managing both the purposes becomes a bothered grindstone for such Micro Finance Institutions. The reason behind the same lies in the fact that the unprivileged section, to whom the loans are provided, lacks a stable income to provide the collateral to the loan amount. Many a times, to fulfill the objective of generating regular cash flows in the institution, proper credit risk analysis is total ignored.

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Investigation of the slow growth rate of the microfinance industry of India

Owing to the increase in the economic development and growing Gross Domestic Product (GDP) of India, there is an increasing demand for financial assistance, especially in microfinance. This demand is not only from corporations and financially stronger groups but also from the lower sections of the society. The delivery of financial services to lower sections of the society is called financial inclusion. Most commercial banks in the country cater to the financial needs of people. The poor section of the society is deprived of financial assistance due to the absence of collateral/ financial security. For meeting the requirements of this segment, microfinance institutions (MFIs) were set up that acted as a provider for the underprivileged section of the society. Read more »

Risk management techniques adopted by small scale microfinance institutions in India

In the previous article, the author reviewed the need for credit risk management in microfinance institutions. Small scale microfinance institutions constitute a sizeable chunk of the entire microfinance industry in India. Owing to the large amount of credit risk faced by microfinance institutions today, the numbers of approaches and techniques have been devised by them in order to mitigate the risk pertaining to the failure of repayment by the customers. Read more »

Advantages of introducing Islamic banking system in India

Islamic banking system in IndiaAs seen in the previous context, announcement of the instituting ‘Islamic banking system’ by the Indian government has garnered nation-wide interest in recent months. The article primarily focusses on the socio-economic development and in promoting egalitarianism or Islamic banking in India. Read more »

Introduction of Islamic Banking in India

Over the past many years, several initiatives have been undertaken by the Indian government and Reserve Bank of India (RBI) to introduce Islamic banking in India. In 2010 and after 34 years, Indian Prime Minister visited Saudi Arabia, which is one of the major investor in Islamic banking (Kumar 2016). Similarly the recent visit of Indian Prime Minister in 2016 has helped to develop bilateral relationship between the two countries. Demographically, many Indians living in the Gulf will garner interest from the introduction of Islamic banking. Read more »

Why banks and other financial institutions predict income of their customers?

Income is considered as one of the factors to determine success in life (Liu, Kuo, He, & Liu, 2006). Banks often rely on models which predict credit risk to decide whether to lend to a loan seeker (Junjie Liang, 2011). Any event, which is subjected to uncertainty, is predicted through actuarial models. Read more »

Understanding the new IRDA guidelines

The Insurance Regulatory Development Authority’s (IRDA) significant move towards adopting a customer-eccentric approach in the Indian life insurance industry has initiated hope for a better tomorrow. But at the same time it has given birth to uncertainties especially in the minds of insurance providers and insurance intermediaries or agents. Read more »

Difference between conventional banks and Islamic banks

Banking in common parlance refer to an organization which transacts in money. This term has been in use for a long time but its inception is still mysterious. Few believe the term ‘Bank’ has its origins in Italy from the term ‘Banchi’ while some believe that it has originated from Greek term ‘Banque’; both of them mean Bank (Singla, 2010-11). Read more »

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