A

SYNOPSIS REPORT
ON
A STUDY ON EFFECTIVENESS OF MICRO FINANCE IN INDIA
AT
KOTAK MAHINDRA

Submitted
By
R. AKHIL RAJ
H.T.NO: 1302-20-672-110
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE
OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Administration

AURORA’S PG COLLEGE
RAMANTHAPUR
(Affiliated to Osmania University)
2020-2022

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 Aurora’s PG College (MBA), Ramanthapur
Department of Management

SYNOPSIS

Title of the Project : A STUDY ON EFFECTIVENESS OF

MICRO FINANCE IN INDIA

Student Name : R. AKHIL RAJ

Hall Ticket Number : 1302-20-672-010

Signature of the Student :

Signature of the Guide :

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 INDEX

. No. CONTENTS Page No

1 INTRODUCTION

2 NEED FOR THE STUDY

3 OBJECTIVES OF THE STUDY

4 SCOPE OF THE STUDY

5 RESEARCH METHODOLOGY

6 REVIEW OF LITERATURE

7 PROPOSED OUTCOMES

8 LIMITATIONS OF THE STUDY

9 CHAPTERISATION

BIBLIOGRAPHY

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INTRODUCTION:
Microfinance, as a concept and service offering many products has seen many changes in the
development which can be traced back to 1970 and 1980. After independence and until late
70‘s, Financial assistance to the borrowers in unorganized sector inclusion was a business
only by government through subsidised schemes for rural development. It became very
famous during 80‘s only when the Grameen Bank proved that companies can also be
profitable by giving out the loans and other financial services to the poor women, but now, it
has become the world‘s biggest mechanism in disbursing the loan and credit services to the
poor. It can also be understood that the MFIs emergence as a service-market offering
financial products profitably are in line with the works by Praha lad who emphasises the size
of market at the bottom of pyramid. It was only credit synonym with ―Microfinance, during
1970‘s but now it is a combination of credit, services, insurance, skill upgradation, training
and other financial and non-financial services is brought under the brand umbrella of MFIs.

Microfinance is defined as any activity that includes the provision of financial services such
as credit, savings, and insurance to low income individuals which fall just above the
nationality defined poverty line, and poor individuals which fall below that poverty line. With
the goal of creating social value. The creation of social value includes poverty alleviation and
the broader impact of improving livelihood opportunities through the provision of capital for
micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of sectors provide microfinance in India, using a range of microfinance
delivery methods. Since the kotak mahindra ltd in India, various actors have endeavoured to
provide access to financial services to the poor in creative ways. Governments also have
piloted national programs, NGO’s have undertaken the activity of raising donor funds for on-
lending, and some banks have partnered with public organizations or made small inroads
themselves in providing such services. This has resulted in a rather board definition of
microfinance as any activity that targets poor and low-income individuals for the provision of
financial services. The range of activities undertaken in microfinance include group lending,
individual lending, the provision of savings and insurance, capacity building, and agricultural
business development services. Whatever the form of activity however, the overarching goal
that unifies all actors in the provision of microfinance is the creation of value.

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NEED OF THE STUDY:
“The study of Microfinance in India with special reference to KOTAK MAHINDRA
LTD”.
India is one of the highly populated countries in the world currently. Reason being
unawareness, illiteracy, avoidance or disinterest; in turn leading to economic downfall and
almost 30-35% of the people are under the Below Poverty Line (BPL). These people are not
even able to meet their consumption need. Therefore there is a need of a tool that not only
serves them but also make them self capable, Microfinance is such an approach that would
result in the better standard of living for them.

OBJECTIVES OF THE STUDY:

1. To study the concept and importance of micro finance
2. The objective of this study is to an overview of Microfinance Industry in India.
3. To study the microfinance services offered by KOTAK MAHINDRA LTD
4. To know the different Products and Services offered by the KOTAK MAHINDRA
LTD
5. Need of microfinance services, different types of micro financial products that are
available in India and supply and demand of services

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SCOPE OF THE STUDY:
The present research was to study the critical study of self-help groups. Hence it is necessary
to work in this area. This would be of great help to the the overall empowerment of women
& men. The knowledge on these aspects could be used to develop strategies to motivate self-
help group members for their enhanced participation in the group. The outcome of the study
would suggest the factors that are responsible for the good performance of self-help groups
formed by Government and Non-Government organization. Further the study would highlight
the role and importance of micro-credit, microfinance institution; role of government and
self-help groups in offering micro-credit. The results of this study would offer important
input to planners, policy maker, Non-governments organizations for framing policies to
empower the women through self-help groups. The success of the programmes depends upon
its critical study of self-help group. Hence attempts have also been made to find out the
benefits attained after implementation of self-help groups and effectiveness made under this
study. The study also surveys the problem faced by the members of the groups. The findings
of which can be used for planning programmes and better strategies can be evolved based on
the results for the effective functioning of self-help groups.

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RESEARCH METHODOLOGY
The methodology adopted to study and collect information regarding the study is as follows:
Sources of Data
I. Primary Data
II. Secondary Data

❖ Primary Data
The primary data is collected by the personal discussion with head of the planning
department in KOTAK MAHINDRA LTD
a)
❖ Secondary Data
The Secondary Data was collected from the different sources. Which are as follows :
➢ Company profile/ reports/ records.
➢ Website
➢ Books, journal’s & other materials

The study is purely theoretical; no primary data collection was required for the project.

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REVIEW OF LITERATURE

BANCOSOL: THE CHALLENGE OF GROWTH FOR MICROFINANCE

ORGANIZATIONS
Banco Sol shows outstanding success in terms of breadth, depth, and quality of outreach and
in terms of sustainability. It is the microfinance organization with the largest number of
clients in Latin America and it reaches poor clients who could never expect to gain access to
conventional financial institutions. The paper discusses the incentive structure associated
with a lending technology that has resulted in low loan arrears and the cost- effective supply
of small loans. Success is explained by a strong concern with financial viability, development
of a lending technology appropriate for the market niche, a long learning period, and
upgrading into a formal intermediary. As it grew, Banco Sol had to face a reduction of
revenues as a proportion of productive assets and an increase in the average cost of funds,
which combined reduced its operating margin by 13 percentage points. This challenge was
fully met by reducing operating expenses as a proportion of productive assets.
Mark Schreiner (2003)
A Cost-Effectiveness Analysis of the Garmin Bank of Bangladesh.
Reports of the success of the Garmin Bank of Bangladesh have led to rapid growth in
funding for microfinance. But has the Garmin Bank been cost-effective? This article
compares output with subsidy for the bank in a present-value framework. For the timeframe
1983–97, subsidy per person-year of membership in Garmin was about $20, and subsidy per
dollar-year borrowed was about $0.22. The Garmin Bank — if not necessarily other micro
lenders — was probably a worthwhile social investment.
David Hulme
This paper reviews the methodological options for the impact assessment (IA) of
microfinance. Following a discussion of the varying objectives of IA it examines the choice
of conceptual frameworks and presents three paradigms of impact assessment: the scientific
method, the humanities tradition and participatory learning and action (PLA). Key issues and
lessons in the practice of microfinance IAs are then explored and it is argued that the central
issue in IA design is how to combine different methodological approaches so that a ―fit‖ is
achieved between IA objectives, program context and the constraints of IA costs, human
resources and timing.
Jonathan Murdoch

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 Leading advocates for microfinance have put forward an enticing ―win-win‖
proposition: microfinance institutions that follow the principles of good banking will also be
those that alleviate the most poverty. This vision forms the core of widely circulated
―best practices,‖ but as a general proposition the vision is fully supported neither by logic
nor by the available empirical evidence. Recognizing the limits to the win-win proposition is
an important step toward reaching a more constructive dialogue between microfinance
advocates that privilege financial development and those that privilege social impacts
GARY M. WOLLER
Although the word of finance in the term of microfinance in core value & the core
element of microfinance are those of the finance discipline has yet to break into the
mainstream & entrepreneur finance literature. The purpose of this article is to introduce the
finance academic community to the discipline of microfinance & microfinance institutions.
Models of Microfinance
Microfinance Institutions & Poverty Elimination
A MFI is an organization that provides the financial service targeted to the poor. Its clients
are generally poor & low income people. They may be female head of household, pensioner,
artisans or small farmers. It obtains finance from banks & in turn provides small scale credit
& other financial services to low income household & other informal business. The
microfinance works around the concept of group lending where it allows a no. of individuals
to provide collateral or guarantee a loan through a group repayment pledges. The incentives
to repay are based on peer pressure if on person in the group default; the other group
members make the payment. It is powerful tool to reducing poverty as it makes capital
available to the unbaked poor at reasonable rates. A survey by ABN AMRO bank clients has
shown that 58% of those who have used microfinance for four years‘ experience a significant
reduction in poverty & 41% have come right out of it. The microfinance institutions aim
primarily to empower people to manage their resources on their own & build sustainable
livelihoods. Development of local indigenous skills & vocational training to foster
employment opportunities are integral part of the objectives, with the ultimate goal to
alleviate poverty.

Existing Models of Microfinance Institutions

Presently the microfinance institutions are operating with diverse methods & means with
common end results to provide affordable financial services to the poor & low income
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people. With access to range of financial tools such families can invest according to their own
priorities viz. school fees, health care, business nutrition having etc.
The microfinance was not popular before seventies. It was in late eighties & early
nineties that it started showing exemplary results in the field of poverty alleviation. The
pioneering effort in this direction was done by Muhammad Yunus of Bangladesh. Today
Garmin Bank has over 1000 branches a branch covers around 25-30 villages with 12 lakh
borrows with over 90% women. The most important feature of the recovery rate of the loans,
which is as high as 98% yet another interesting feature of this bank is advancing credit
without any collateral security.

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Review 1: Grameen bank groups and self help groups.

Author: Malcolm Harper.

Journal: The official publication of the American Finance

Association,23 April 2002, vol 4 no17.
Abstract:
The paper described and explained each system and compared their sustainability, their
outreach and impact on the poor and their institutional feasibility. The paper concluded by
summarizing the pros and cons of both the system in a table. The summary table includes the
pluses and minuses for both clients and banks and also the suitable conditions for both the
system to operate smoothly.

Review 2: ICICI Bank partnership model’ analyzed the partnership

model of financing microfinance institutions.

Author: Bindu Ananth
Journal: The Review of Financial Studies Published by Oxford Academic, 4 Sep 2005 vol
32.
Abstract:
The paper compared three financing models for microfinance. The three models were Self
help group bank linkage model, financial intermediation by microfinance institutions and the
partnership model – MFI as a servicer. The paper described in detail the need for partnership
model and the description of how the model worked. The researcher said that the model was
unique in that it combines both debt as well as mezzanine finance to the MFI in a manner that
rapidly lead to the increase inoutreach, while it unlocked large amounts of wholesale funds
available in the commercial banking sector in India. The paper also discussed how to build
links to capital markets for financing microfinance through securitization. It concluded by
highlighting key enablers for an environment of rapid microfinance growth including
regulator support for hybrid models of outreach and investments in training and funding of
initial expenses of new or emerging MFIs.

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Review 3: The report titled ‘Microfinance in Asia: trends, challenges and
opportunities’.
Author: Jamie Bedson
Journal: Journal of Financial Economics, Oct-Dec 2009 vol 20(4).
Abstract:
The main purpose to publish the report was to equip microfinance practitioners with ideas on
how to successfully grow and strengthen their businesses and better serve the unbanked and
the poor. The report was mainly divided into various sections namely introduction to
microfinance in Asia, executive summary, Asia microfinance industry assessment summary,
financing and investment, savings and asset building, microfinance networks.

Review 4: Group lending and individual lending with strategic default.

Author: Bhole B. and Ogden S

Journal: Journal Of Accounting & Finance, Mar 2010 vol 91(2).
Abstract:
The study found out results by developing its own strategic model. The paper concluded that
unless group members could impose sufficiently strong social sanctions on their strategically
default partners, or unless the bank used cross reporting mechanism, group lending can
perform worse than individual lending. It was showed that when certain restrictions on group
lending contract were relaxed then group lending yielded higher welfare than individual
lending even in the absence of any social sanctions or cross reporting.

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Review 5: Micro Finance: A Critique.
Author: Walter E. Block
Journal: The Journal of an Alternative Economics 13 Aug, 2018 vol.20 no.3
Abstract:
Micro‐finance comes to us as a left wing attack on the free enterprise system; as such, it
ought to be opposed by all freedom lovers, at least in its present format. Other baggage
weighing it down is, if not absolute fraud, then, what might well be considered at least
serious chicanery. A further criticism is the cult‐like behaviour now surrounding it. However,
is micro‐finance per se necessarily fraudulent? Can it only be favoured by critics of laissez
faire capitalism? What of micro‐finance shorn of all such encumbrances? Should it then be
supported? No. Even the Platonic Ideal of micro‐finance has serious difficulties. This claim is
a matter of prudential judgment, not praxeology. But, even a pure‐as‐the‐driven‐snow variety
of this scheme still violates the economic concepts of specialization and division of labour, an
appreciation of the infant industry fallacy, and several other basic building blocks of the
dismal science. There are other better ways to “cure poverty” than this misbegotten scheme.
This one, paradoxically, exacerbates impoverishment by placing investment resources in
hands less capable of making it grow than would otherwise be the case.

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 INDUSTRY PROFILE
For the Indian investors, the year belonged to stock markets, which have been shining
bright when it comes to generating wealth, while the glitter of gold and silver faded for
the second straight year in 2013.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per
cent for investors in 2013, while gold prices fell by about three per cent and its poorer
cousin silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for
two consecutive years now vis-a-vis equities, shows an analysis of their price movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid
anticipated tapering over last several months combined with FII investment in Indian
stocks.
"This movement has been equally true for global markets as 2013 saw gold losing its
shine and markets coming back with a bang," said Jayant Manglik, President Retail
Distribution, Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.
In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of
about 12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets,
including stocks in Indian markets. However, assurance by the Fed about planned and
staggered tapering in stimulus once again proved to be a catalyst for the markets."

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"External factors affecting Indian stocks seem to be negative for the first half of 2014 due
to continued strength of the US dollar and benign in the second half. By that time,
elections too would have taken place. A combination of domestic and international
factors point to a bumper closing of Indian markets in 2014 with double-digit percentage
growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and
20 per cent, respectively, in 2013.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly
USD 20 billion) till December 20. In 2012, they had pumped in Rs 1.28 lakh crore (USD
24.37 billion).

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 COMPANY PROFILE

About KOTAK

The KOTAK (India Infoline) group, comprising the holding company, India Infoline Ltd
(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the
Indian financial services space. KOTAK offers advice and execution platform for the entire
range of financial services covering products ranging from Equities and derivatives,
Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans,
Investment Banking, GoI bonds and other small savings instruments. KOTAK recently
received an in-principle approval for Securities Trading and Clearing memberships from
Singapore Exchange (SGX) paving the way for KOTAK to become the first Indian brokerage
to get a membership of the SGX. KOTAK also received membership of the Colombo Stock
Exchange becoming the first foreign broker to enter Sri Lanka. KOTAK owns and manages
the website, www.indiainfoline.com, which is one of India’s leading online destinations for
personal finance, stock markets, economy and business.
KOTAK has been awarded the ‘Best Broker, India’ by FinanceAsia and the ‘Most improved
brokerage, India’ in the AsiaMoney polls. India Infoline was also adjudged as ‘Fastest
Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field
of equity research, KOTAK’s research is acknowledged by none other than Forbes as ‘Best
of the Web’ and ‘…a must read for investors in Asia’. Our research is available not just over
the Internet but also on international wire services like Bloomberg, Thomson First Call and
Internet Securities where it is amongst one of the most read Indian brokers. A network of
over 2,500 business locations spread over more than 500 cities and towns across India
facilitates the smooth acquisition and servicing of a large customer base. All our offices are
connected with the corporate office in Mumbai with cutting edge networking technology. The
group caters to a customer base of about a million customers, over a variety of mediums viz.
online, over the phone and at our branches.

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PROPOSED OUTCOMES
 Consult start-up microfinance programs that struggle with operational, financial, or
institutional sustainability
• Demonstrate that banking the unbanked people can create economic and social
infrastructure thereby increasing the GDP of the country.
• Build professional systems that can help people to be financial literate through which
poverty eradication is possible within the community.
• Ensure transparency and enhance credibility through disclosures which can help to attract
investments and earn more clients.
Provide support for capacity building initiatives

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LIMITATION
➢ The data is collected for calendar year not for financial year.
➢ The data for the study considered is for the 5 years, so analysis is restricted to the
period only
➢ Major limitation is for the time duration of the project that is 45 days.
➢ Study was focused mostly on KOTAK MAHINDRA LTD.

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 CHAPTERISATION

CHAPTER -1 - INTRODUCTION

This chapter includes the introduction of the topic, need, scope, objectives of the study,
Project limitations and methodology of the study.

CHAPTER - 2 REVIEW OF LITERATURE

This chapter includes the theoretical background and articles written by different authors and
brief explanation of the topic.

CHAPTER - 3 - INDUSTRY PROFILE & COMPANY PROFILE

CHAPTER - 4 - DATA ANALYSIS AND INTERPRETATION

This chapter includes the comparative analysis of the financial statements of the five years
data and it also includes the interpretation based on the study.

CHAPTER - 5 – SUMMARY AND CONCLUSION

This chapter includes the overall summary of the project and the conclusion based on the
study during the period.

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BIBLIOGRAPHY
books:-
Herman, J. (2002) [1897], A Classified Collection of Tamil Proverbs, London:

Routledge.

Hulme, D. (2011), ‗Is Micro debt Good for Poor People? A note on the Dark Side of
Microfinance‘, Small Enterprise Development, 11(1): 26-28.
Littlefield, E. and Rosenberg, R. (2004), ‗Microfinance and the Poor: Breaking down
walls between microfinance and formal finance‘, Finance and Development, 41(2): 38-
40.

Montgomery, R. (1996), ‗Disciplining or protecting the poor: avoiding the

social costs of peer pressure in microcredit schemes‘, Journal of International
Development, 8(2): 289305.
Websites:
• http://www.indiastat.com/

• www.icicibank.com

• http://www.manfromindia.com/search/label/Microfinance

• www.final-yearproject.com

Magazines and News Papers:

• Efficiency with Growth: The emerging face of Indian Microfinance By Sanjay Singh
M.D. Micro Credit Rating International Limited.
• Paper 02-17, Department of Massachusetts Institute of Technology.

• ―Financial Intermediaries‖, Economic and political weekly, Vol. XLII, no 13

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