MICRO FINANCE COMPANY REGISTRATION

It is widely recognized that only 20.77% of the country’s total population currently has access to bank loan facilities. This limited access is primarily due to factors such as lack of awareness among rural individuals, illiteracy, and other barriers. Moreover, out of this 20.77%, only 8.63% meet the strict eligibility criteria set by banks, further excluding a significant portion of the population from accessing credit through traditional lending channels.

To address this issue and provide easier and more accessible short-term credit facilities to the poor and needy individuals in the country, the Government of India, in collaboration with the Reserve Bank of India (RBI), has recommended the establishment of Micro Finance (Section-8) Companies. These companies have been introduced with the primary objective of delivering short-term credit services to those segments of society that either lack access to formal banking channels or fail to meet the extensive requirements set by traditional banks.

To realize your aspiration of starting a company, you must undergo the registration process, provide the necessary documents, and commence operations smoothly.

1.     Non-Banking Finance Company – Micro Finance Institutions (commonly referred to as NBFC-MFI): This category of Micro Finance Company necessitates separate registration with the Reserve Bank of India (RBI). Additionally, it must maintain a minimum Net Owned Funds (NOF) ranging from Rs. 2 Crores to Rs. 5 Crores, contingent upon the specific requirements of different states.

2.     Micro Finance Company Incorporation: This form of Micro Finance Company is not mandated to register with the RBI, thereby eliminating the obligation to maintain a minimum NOF of Rs. 2 Crores.

At Vakiltrust, we specialize in assisting our clients with the swift establishment of their Micro Finance Businesses. While we offer registration services for both types of Micro Finance Companies (NBFC-MFI and Micro Finance Section-8 Company), as a responsible and renowned consulting firm, we recommend that clients who are new to the micro-financing field opt for the Micro Finance Section-8 Company. This structure provides several advantages over the other type of Micro Finance Companies:

To fulfill your dream of startup a company, must go through the registration process, documents required and get started very easily.

1) Non Banking Finance Company- Micro Finance Institutions (popularly known as  NBFC-MFI): This type of Micro Finance Company has to get itself registered with RBI separately. It also has to maintain a minimum Net Owned Funds (NOF) of Rs. 2 Crores to Rs. 5 Crores, depending on states to states.

2) Micro Finance Company Registration: This type of Micro Finance Company is not required to register itself with the RBI and thus is not required to maintain a minimum NOF of Rs. 2 Crores.

We at Vakiltrust, helps our prospective clients to start their Micro Finance Business in no time. Though, we at Vakiltrust offers registration of both types of Micro Finance Companies (i.e., NBFC-MFI and Micro Finance Section-8 Company) but being a responsible and leading consulting firm in the market, we suggest that if our client is new in the field of micro-financing, he/she should go for the Micro Finance Section-8 Company as it has following advantages over the other type of Micro Finance Companies:

1.      No Separate RBI Approval: Unlike NBFC-MFIs, Micro Finance Section-8 Companies do not require separate approval from the Reserve Bank of India (RBI).

2.      No Minimum Net Owned Funds (NOF) Requirement: Micro Finance Section-8 Companies are not obligated to maintain a minimum NOF of Rs. 2 Crores.

3.      Easy and Fast Incorporation: The incorporation process for Micro Finance Section-8 Companies is relatively straightforward and efficient compared to NBFC-MFIs.

4.      Lower Registration Costs: The registration expenses for Micro Finance Section-8 Companies are typically lower compared to NBFC-MFIs.

5.      Reduced Legal Compliances: Micro Finance Section-8 Companies have fewer legal compliance requirements compared to NBFC-MFIs.

At Vakiltrust, as a leading business consultant, we offer a quick Micro Finance Company Registration Service in India, which involves the following five simple steps: