The word Microfinance Company (MFC) refers to an organisation that provides financial aid and support to persons in rural areas, low-income groups, and underdeveloped areas of society. The primary goal of this business strategy is to provide financial services to people from all walks of life. To start an MFC in India, you must first get a Microfinance Company Registration from the Reserve Bank of India.

Objectives Of Microfinance Companies

• To provide low-income persons with the chance to become self-sufficient
• Provide banking services for small sums of money.
• To help those who work in a variety of vocations such as transportation, fishing, construction, and so on.
• Provide financial support to small businesses that cannot afford any collateral.
• Women's engagement in producing sustainable livelihoods should be increased.
• Ensure that quality healthcare is available.
• Increase and diversify low-income people's sources of income while also providing chances for self-employment.

Roles Of Microfinance Company

Funding For Sustainable Livelihood

Microfinance allows poor people to become entrepreneurs and improve their living standards by providing financial aid. Because most microfinance organisations offer loans with no collateral, the options for starting a business are more flexible. The MFI assists the following member in improving their living conditions:

• Villagers
• Micro Business owners
• Women in need
• Poor family and economically disadvantaged people

Better Loan Repayment Rate

Because the interest rates on these loans are lower than those offered by traditional lenders, defaulting on the loan is uncommon. As a result, for many poor people, a microloan is an obvious way out of a weak financial background.

Allows you to save money, invest in the future, and educate your children

Due to the rising level of poverty, education is being avoided due to the accompanying expenditures. Microloans help people's livelihoods become more solid, and their savings options expand. Individuals may generate opportunities for future investment, higher education, and health care by saving.

Creates Employment Opportunities

Microfinance assists individuals in starting businesses that lead to job prospects. Increased labour aids an individual's productivity and income stability.

Different Types Of MFC Registration In India

RBI Registered

To register a Microfinance Company as a Non-Banking Financial Company, the applicant must first form a company under the Companies Act 2013, either as a Private Limited or Public Limited Company.

Following that, the stated applicant firm must follow all of the processes necessary to gain microfinance company registration, starting with the minimum capital required and ending with the official filing of the registration application with the Reserve Bank of India's regional office.

Section 8 Registered

To start a Microfinance Company as a section 8 company in India, the applicant company must first apply for the Digital Signature Certificate and Directors Identification Number for all prospective directors.

Following that, it must submit an application for the approval of Name in Form INC – 1. It also necessitates the preparation of the Memorandum of Association and Articles of Association for the aforementioned business, as well as the submission of INC – 12 together with the necessary documentation in order to acquire a Microfinance Company Registration.

Process For Obtaining A Microfinance Company Registration

The process for obtaining a microfinance company registration in India involves the following steps:-

 Register A Company

The applicant must first register a company under the Companies Act 2013, which is the first and most important stage in the process of acquiring Microfinance Company Registration in India.

In addition, the applicant must complete a SPICe + Form with the Ministry of Corporate Affairs (MCA) in order to be incorporated.

The Ministry of Corporate Affairs repealed the minimum capital requirement for forming a company in India with the Companies (Incorporation) Act 2015.

Application in SPICe+ 

Under the applicable MCA services, the candidate must select the SPICE+. The applicant will then be sent to another website where he or she must submit a fresh application.

Check For The Approval Of Name

If the company requesting for Microfinance Company Registration already has a name, the applicant must use the auto check to meet the requirements for the company's name.

Additionally, all additional information pertaining to the company's name must be provided.

In addition to the above-listed details, the following information must be submitted:

• The applicant’s company name;
• Location of the Registered Office Premises;
• Operations that the applicant firm carries out;
• PAN, TAN, and other registrations that the company completes;
• The company must do a pre-scrutiny check for registration.

Raise The Capital Required

The applicant company must also obtain a specified amount of capital according to the requirements in the next step of the Microfinance company registration procedure.

Opening Of A Bank Account

The directors of the applicant company would need to activate a current bank account as the next stage. A certificate stating that no lien has been established will also be necessary for the above-mentioned procedure. For this kind of certificate, an application will be sent to the Apex Bank's regional office.

Apply To RBI For Microfinance Company Registration

Then, at the Reserve Bank of India's regional office, all certified copies of the paperwork necessary for obtaining microfinance company registration must be presented.

The below are the documentation and certified copies that must be filed with the RBI regional office:

• The Registrar of Companies has received copies of the Incorporation Certificate.
• he certified copy of the Memorandum of Association
• The copy of the Articles of Association that has been officially authenticated
• A copy of the Fixed Deposit Receipt
• A certificate from the company's bankers stating that there are no liens on the Net Owned Fund

File An Online Application

To get Microfinance Company Registration in India, the applicant must now complete an online registration application with the Reserve Bank of India. The applicant will then be given a Company Application Reference Number for future use.

Furnish The Hardcopy

The applicant must submit the hard copies at the regional office of the Reserve Bank of India in the last step of the Microfinance Company Registration procedure. Following submission, the Reserve Bank Of India will conduct a review and due diligence procedure to ensure that the company has met all of the criteria.

Documents For Microfinance Company Registration

The documents required for Microfinance Company Registration:

• A copy of the company's Incorporation Certificate
• Details of the Applicant Person's Permanent Account Number
• Details of the planned Directors' PAN Cards
• All proposed Directors' Digital Signature Certificates
• All nominated Directors will be allotted with a Director Identification Number
• Photographs at passport size for all potential Directors
• Proof of address for the location used as the company's Registered Office
• If the property that is being used is rented, a copy of the fully stamped Lease Deed or Rental Agreement
• If the property that is being used is a Self-Owned Property, a copy of the Sale Deed or Ownership Certificate
• The Memorandum of Association in a certified format
• The company's Articles of Association in a certified format
• A certified copy of the banker's report
• A verified copy of the Board Resolution that was passed
• A copy of the Auditors' Report also with minimum Net Owned Funds shown
• The copy of the Compliance Certificate from a Chartered Accountant (CAs)
• The applicant company's structured business strategy
• A copy of the most recent financial report relating to the directors
• A copy of every Key Managerial Personnel and proposed Directors' Income Certification
• Certificate of the Company's No Objection
• No Lien Certificate from a Banker
• A copy of the company's credit statement
• If the recommended director is an Indian national, a copy of his or her passport Foreign nationals, on the other hand, must present notarized copies of their passports
• Certificates of net worth for all prospective directors

It should also be noted that the application firm must provide all essential documents, which must be no more than two months old.

Conclusion

A microfinance company is distinct from the Section 8 company because it is a Non-Deposit Taking NBFC. The Reserve Bank of India Act 1934 and the orders issued by it control and regulate the activities and affairs of a Microfinance Company.

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