Microfinance Company Registration
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Procedure For Microfinance Company
NAME APPROVAL APPLICATION
DSC (DIGITAL SIGNATURE)
APPLY FOR DIN
CERTIFICATE OF INCORPORATION
PAN AND TAN APPLICATION
What is a Micro Finance Company?
The Microfinance Company is essentially the financial organizations that provide small-scale financial services in the form of loan, credit, or savings. These organizations are acquainted with facilitating the credit framework for independent ventures as they don’t get a loan from banks because of their perplexing process. In this way, it is ordinarily named as a Micro-credit association. They provide small loans to varied small businesses or households that do not approach to formal banking channels or eligibility for loans.
They provide small loans that are under Rs.50,000 for rural areas and for urban it is Rs.1,25,000. Registering the Section-8 Company with MCA (Ministry of Corporate Affairs) is the easiest way to register a Micro Finance Company in India. Without charging any peripheral cash or assurance security. It can give credits at reasonable rates coordinated by the RBI and central government. They are a colossal help to all country and farming development including income and employment creation.
There are essentially 2 kinds of microfinance organizations that are permitted in India, one is which has to be registered with the RBI and another is the non-benefit type, which is enlisted as section 8 company and does not need RBI approval.
Microfinance Company's Features
An organization that operates as a microfinance company must have the following characteristics:
- ✔ The company must be registered in accordance with the provisions of the Companies Act, 2013 or the Companies Act, 1956.
- ✔ A company must have the required net worth in order to register as a microfinance institution.
- ✔ The microfinance company registration is required in order to obtain the necessary license.
- ✔ The lower classes of society are typically the clients of microfinance firms.
- ✔ Smaller segments of society are given access to banking and other services; typical clients of a microfinance company are those who work in the carpentry, fishing, or other types of businesses; and this enterprise was founded with the primary goal of not requiring any kind of collaterals.
Who is eligible to register an MFI company in India?
The following individuals qualify for MFI Registration in India:
- ✔ Farming activities
- ✔ Small-scale businesses
- ✔ Professional and transportation trade
- ✔ Artisanal businesses
Why to register for Microfinance company?
Some of the working mechanisms of micro-finance companies are as follow:
Promoting socio-economic growth:
At the community level, the microfinance organization will promote socio+ecomic development. Additionally, enabling self-improvement groups alongside with encouraging manageable development by them. A variety of other financial services will be required by the poor and not simply credits; thus, it is an integral asset to take out the neediness factor..
Provide a way to funding:
It gives a superior overall loan repayment rate than conventional financial products. Further, which will help in addressing credit requirements for such a population range from consumer loans, business loans, working capital loans, emergency loans, housing, etc.
No RBI Approval:
No long techniques and simple to register as there is no RBI endorsement required when you register as a non-profit company. Even, there is no requirement for the least capital of Rs. 2 Crores.
Offers reasonable services for small businesses:
It centers on building a financial system for the poor and jobless and aims to make permanent local financial institutions that try to attract domestic deposits, recycle them into loans, and give other financial services.
Minimum Compliances:
The company is relied upon to follow with RBI guidelines regardless of whether it can’t enlist with the reserve bank. In any case, no endorsement from RBI is required. Section 8 company will comply with the Companies Act the same method as other companies do. That’s all!
Documents Required For Company Registration
For NBFC enrollment, the company will apply in the format as indicated by the RBI. Before enrolling the company as an NBFC, RBI may assess from the financial & different books to fulfill the accompanying conditions:
PAN card: In the case of Indian citizens, the PAN card of shareholders and directors.
Passport size photograph: Not more than 10 months old photograph of directors and shareholders..
ID proof: Copy of Aadhaar card/voter identity card/passport/driving license of directors and shareholders
Rent agreement: If you have rented property, then a copy of the rent agreement
Address proof: Electricity bill, water bill, bank statement, gas or telephone bill of shareholders and directors.
Registered office proof: Electricity bill, water bill, bank statement, gas or telephone bill of the registered office address.
NOC from the owner: No objection certificate is needed from the owner of the registered office
Advantages of Micro Finance Company
Self-sufficiency
Once the microfinance company is registered, all associated operations will be financially independent.
Funding
Securing funding to register a microfinance company is typically a straightforward process.
Better Repayment Rate
Microfinance firms unquestionably have a better repayment rate when compared to banks and financial institutions. This would be in reference to short-term loans given to people and other businesses.
Reach rural areas
Microfinance companies are better able to reach rural areas. These businesses can offer rural areas loan facilities. Typically, these financial institutions are thought to have a wider reach than big businesses and banks.
Tax Benefits
There are a large number of tax benefits associated with registering a microfinance company in India.
No requirement for RBI approval
No requirement for any type of RBI approval exists because there are minimal compliance requirements for establishing a microfinance company.
Interest Rate Paid
Microfinance companies typically have the freedom to impose high interest rates. A microfinance company may charge interest rates ranging from 20% to 25%.
Promotes Entrepreneurship
Establishing this type of entity promotes entrepreneurship to fulfil the demands of the business.
Separate Legal Entity
Section 8 Separate Legal Entity in accordance with the 2013 Companies Act’s provisions, a microfinance company must be registered. Because of this, each member of the microfinance company is a separate legal entity.
Credibility
The public is more likely to believe such an entity. There are additional loan types and disbursement options available.
Promoting socio-economic growth
At the community level, the microfinance company will promote socio & economic growth. Additionally, empowering self-help groups and having them facilitate sustainable development is a potent tool for reducing the poverty factor.
Affordable services for small businesses
It focuses on creating a financial system for the underprivileged and jobless and seeks to establish long-lasting local financial institutions.
Minimum Compliances
Even if a company is not required to register with the reserve bank, it is still expected to adhere to RBI standards. A Section 8 company must comply with the Companies Act in the same manner as other companies, and the RBI does not need to approve.
How to register the Micro-Finance Companies in India?
The microfinance can be enrolled in India by Section 8 Company. Section 8 does not need any base capital. Here is the process:
Prepare DSC & file for Name Approval:
The initial step is to apply DSC and DIN. This sets aside some time for 1-2 days. It is utilized for making the online structures, filed with ROC for Incorporation Of Company. DSC can’t be utilized in Physical Documents. The Company Registration within the method is completely online and so it needs DSC to incorporate an organization. From that point, you require filing for name approval. Name Applications under RUN will be prepared by the Central Registration Centre (CRC). The Name Approval is liable to finish check by the CRC and from there on Approval or Rejection must be conveyed by E-Mail to the Applicant. The name should be of one kind and must end with words like establishments, Sanstha, etc. Additionally, a maximum of 6 names can be filed at one time.
Apply for DIN:
Director Identification Number – DIN is a Unique Number that is provided to the Existing Directors of Incorporated Companies. This recognizable number is given by the Central Government to any person, intending to be appointed as Director or to any Existing Director of a Company. Once Got DIN Number, the Director can apply the equivalent forever life irrespective of the company he/she works in. On the off chance that you change the organization, it doesn’t change the DIN Number.
Certification of Incorporation:
The third step is to file the joining alongside every single vital paper. The form is joined with all the fundamental attachments like MOA, AOA, declarations, and so on. The incorporation certificate must frame with CIN, PAN, and TAN. The organization needs to pay the Stamp Duty Irrespective of the Capital as Stamp Duty is a state subject. When the organization is consolidated, you can begin the microfinance business in India. But, please recall that you cannot make any deposit under section 8. After that promptly apply for PAN and TAN as they will be required to open A Bank Account.