Section-8 Microfinance Company
Getting a loan from the bank for a small business is a complex and tedious process that needs collateral before the loan gets approved. So many small businesses knock on the doors of microfinance companies to get a loan. Microfinance companies also encourage women entrepreneurs and provide assistance to start-ups. But how to register a microfinance company, and is it required to get approval from the RBI? Let’s drive you through the process of registering a microfinance company.
What is Section 8 Microfinance Company?
A Section 8 Microfinance company registered under the Indian Companies Act, 2013. With the objective of providing financial to small business groups who are excluded from the formal banking system. Simply put, getting a loan from the bank is a tedious process. A Section 8 Microfinance Company can offer loans, insurance, and other products to its clients without requiring any collateral or security. The aim of a Section 8 Microfinance Company is to promote social welfare and economic development among the poor and marginalized sections of society.
What are the features of a Section 8 Microfinance Company?
Some of the features of a Section 8 Microfinance Company are:
- It is registered with the Registrar of Companies (ROC) as a non-profit organization under Section 8 of the Companies Act, 2013.
- It does not need to obtain a license from the Reserve Bank of India to operate as a microfinance institution as long as it follows the RBI guidelines on microfinance lending.
- It can charge interest rates of up to 26% p.a. On its loans, which is higher than the rates charged by banks and other regulated financial institutions.
- It can sue the defaulter in case of non-payment of pending Loans.
- It has to comply with the provisions of the Companies Act 2013 and file annual reports and returns with the ROC and the Ministry of Corporate Affairs (MCA).
- It can also engage in other incidental or facilitative activities to its main objectives, such as education, health, sanitation, environment, etc.
- There is no demographic barrier to Microfinance Company.
- No minimum capital requirement.
- It can lend unsecured loans.
What are the documents required for Section 8 Microfinance Company?
Documents required for Section 8 Microfinance Company:
- Aadhaar card and PAN of both the directors
- Recent bank statements of both directors.
- Address proof documents
- Passport size photos
- Phone number and email address
- Utility bills
