How to Register Microfinance Company Registration in India Process & Fees
A microfinance institution is like a helper for small businesses that don’t have a lot of money. It gives them different financial services, such as loans, savings, and insurance. According to NABARD (National Bank for Agriculture and Rural Development), a microfinance institution is about providing small amounts of money to businesses in places like villages and small towns.
These businesses might be in the countryside or even in cities, and the aim is to help them with their specific money needs. Only special companies, called Non-banking Finance Companies, can become microfinance companies. But, before they can start, they need permission from the Reserve Bank of India. It’s like a way to make sure everything is done the right way.
Why We Need for Microfinance Companies?
In India, we have banks that give loans to businesses, but there’s also something called microfinance companies, and they’re helpful for some important reasons:
Helping Those Without Collateral: Microfinance companies give money to businesses that don’t have things to pledge as security.
Supporting Women in Business: They encourage women to start and run their businesses.
Backing Startups: Microfinance supports new businesses by giving them the help they need.
Small Amounts for Everyone: Even if you need just a little bit of money, microfinance companies can help, like giving hand loans.
Making Borrowing Formal: Microfinance makes lending money more organized. This helps people who don’t earn a lot to borrow money in a good way. It stops them from borrowing too much and getting into big problems with debts later.
Checklist to Set Up a Microfinance Company Registration
To start a microfinance company in India, it can be either a public or private company. But, before you begin, there are some important things to check:
Number of People Needed:
For a Private Limited company, you need at least two members.
For a Public Limited company, you need at least seven members.
Directors Required:
For Private Limited and Section 8, you need at least 2 directors.
For Public Limited, you need at least 3 directors.
Resident Director:
You must have at least one director who is a resident (stays in India).
Choosing a Unique Name:
Pick a name for your company that is unique and valid.
Having Some Money:
You need a certain amount of capital (money) to get started.
Before you start the process, make sure you have these things in place. It’s like a checklist to make sure everything is ready for your microfinance company.
Microfinance Company Registration Process Step-by-Step
To start a microfinance company (MFI) in India as a Non-Banking Financial Company (NBFC), you must follow these steps:
Step 1 – Documentation:
Before anything else, you need to gather and file important documents along with your application to the Reserve Bank of India (RBI). Not having all the required documents could result in your application being rejected.
Step 2 – Incorporate your company:
Your microfinance company can be either a Public or a Private Limited Company. So, the first thing is to officially set up your company according to what suits it best. We offer help in incorporating both private and public limited companies.
Step 3 – Ensure Capital Adequacy:
Before applying to the RBI, make sure your microfinance company has enough capital. The required amount is ₹5 crores, except for North Eastern states where it’s ₹2 crores.
Step 4 – Deposit Capital:
Once you have the required capital, deposit it as a fixed deposit in a bank. Get a No Lien Certificate from the bank to show that the money is reserved for your company.
Step 5 – Apply for RBI license digitally:
Download the application form from the RBI website, fill it out manually, and submit it online along with the necessary documents. You’ll get an application reference number upon successful submission.
Step 6 – Submit the application to the RBI office:
Provide a physical copy of your application, the reference number, and copies of necessary documents to the RBI Regional Office. They review your application and send it to the Central Office if everything checks out.
Step 7 – Issuance of RBI license:
After a few days, the RBI will issue your license. Once you have it, your microfinance company can start operating without any problems.
Microfinance Company Registration as a Section 8 Company
If you want to register a company as a Section 8 company, here’s what you need to do:
Apply for Digital Signature Certificate (DSC) and Director Identification Number (DIN): First, you need to get a DSC and DIN. DSC is like an online signature, and DIN is a unique number for directors.
Apply for name approval: Next, you have to pick a name for your company and get it approved. The name should show that it’s a Section 8 company, so use words like Sanstha, Foundation, or Micro Credit.
File Memorandum of Association (MOA) and Articles of Association (AOA): After the name is approved, create the MOA and AOA documents and file them with necessary papers.
File all relevant documents: Lastly, submit all the needed documents, like PAN cards, identity and address proofs, photos of directors, proof of your office, and other required papers. Also, pay the state-mandated stamp duty.
Registering a microfinance company as a Section 8 company is easier, but keep in mind it has limits on lending. So, think about all the details before deciding.
FAQs About Microfinance Company Registration
The registration process for a microfinance company typically involves the submission of necessary documents to the relevant regulatory authorities, obtaining approvals, and ensuring compliance with legal requirements. The specific steps may vary depending on the jurisdiction.
Eligibility criteria often include financial stability, relevant experience in the financial sector, and adherence to specific regulatory requirements. Detailed criteria can vary by jurisdiction and are usually outlined by the regulatory authorities.
The duration of the registration process can vary based on factors such as the jurisdiction, completeness of documentation, and responsiveness of regulatory authorities. On average, it may take several weeks to a few months to complete the process.
Commonly required documents include a business plan, financial statements, details of directors and key personnel, proof of address, and other relevant legal documents. The specific requirements may vary by jurisdiction.
Microfinance companies are typically regulated by financial authorities or central banks in the respective jurisdictions. It is essential to identify and comply with the regulations set forth by these regulatory bodies.
A registered microfinance company can offer a range of financial services, including microloans, savings accounts, insurance, and other related products. The scope of services may be defined by regulatory guidelines.
Registered microfinance companies are required to comply with ongoing regulatory and legal obligations. This includes submitting periodic reports, financial statements, and ensuring compliance with local financial regulations.
In many jurisdictions, foreign entities or individuals may be allowed to register a microfinance company, but they often need to adhere to specific regulations, including obtaining necessary approvals from relevant authorities.
Fees for microfinance company registration can include government fees, licensing fees, and other related costs. The specific amounts and types of fees depend on the jurisdiction and the nature of the microfinance activities.
Post-registration, microfinance companies may access support such as training programs, networking events, and resources offered by industry associations, regulatory bodies, or other relevant institutions to enhance their operations and compliance.
