Microfinance Company was created by the Indian government in order to provide simple loans to the general public. These organisations provide financing to small and medium-sized businesses (SMEs) and other types of businesses who find it difficult to obtain loans from large financial institutions and banks. As a result, this type of company is referred to as a Micro-Credit Agency or a Microfinance Company. This company is set up to give small loans and financing to businesses.
A microfinance company can be simply formed by registering it as a section 8 company under the Companies Act of 2013.
The easiest way to register a Micro Finance company in India is through a Section 8 Microfinance Company. If someone wants to form a microfinance company, they should start with a section 8 corporation.
The RBI’s interest rate and processing charge standards must be followed by Section 8 companies.
Features of Section-8 Microfinance Company
- It is not necessary to obtain RBI permission.
- There is no requirement for a minimum capital of Rs. 5 crores.
- Minimum Requirements
- Can provide a Rs.50,000 unsecured loan to a small business.
- Can provide loans up to Rs.1.25 lakh for residence
- The RBI’s interest rate and processing charge standards must be followed by Section-8 companies.
- It is a legal financing company, and you can sue the defaulter if the loan is not paid back.
- Licensed under the Companies Act of 2013, Section 8.
Registration Process of Microfinance Section-8 Company-
- Prepare the DSC and Submit the Name Approval Form
The first step in forming a Section 8 corporation is to create a DSC. As quickly as possible, apply for a Digital Signature Certificate (DSC). Words like Foundation, Society, Association, Council, Club, Charity, Academy, organisation, Federation, Institute, Chamber of Commerce, Development, and others should be used in Section 8 corporations.
- Submission of Section 8 Incorporation Forms on MCA Portal
One shall submit a section 8 company registration application with the required documentation before the ROC after obtaining the Regional Director’s approval. After receiving all explanations, the ROC will issue a Certificate of Incorporation and a Company Identification Number (CIN).
- Submission of MOA and AOA Files
To file Section 8 company registration applications, one must first draft the Memorandum of Association (MoA) and Articles of Association (AoA).
- Pan (Personal Identification Number), Tan (Taxpayer Identification Number), and Bank Account
When registering a Section 8 company in India, one must have your PAN, TAN, and bank account available.
Basic Documents for a Section-8 Micro Finance Company’s Incorporation
- Aadhar Card
- If a person’s PAN card and Aadhar number are linked, he or she can only file an income tax return.
- All directors and shareholders of the incorporated company will be required to provide address proof.
- PAN is required for Indian citizens. Foreign nationals must produce an apostilled or notarized copy of their passport.
- Residence proof documents, such as a bank statement or an electricity bill, should be no older than two months.
- All companies must have a registered office in India.
- If the property is rented, a rent agreement and a letter of authorization from the landlord are required. If it’s a self-owned property, provide a utility bill or other proof of residence.
Documents submitted must be no more than two months old. All documents submitted must be legitimate.
Benefits of Section-8 Micro Finance Company
The Government of India and the Reserve Bank of India have created a conducive policy framework for Microfinance Institutions (MFIs) to provide the sector with the necessary legitimacy and impetus. The following are the advantages of starting a microfinance company.
- Make funding available.
- Self-sufficiency and entrepreneurship are encouraged.
- Compared to standard banking products, it has a higher overall loan repayment rate.
- strengthen your financial status till things improve.
- Emergency loans, consumer loans, business loans, working capital loans, housing, and other types of credit assistance are available to this population.
Micro finance companies are financial businesses that specialise in providing small-scale financial services such as loans, credit, and savings. These companies were created to make the credit system easier for small enterprises, who are unable to obtain a loan from banks due to their lengthy application process.