Section 8 Microfinance Company
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About Section 8 Microfinance Company
A Section 8 microfinance company is a non-profit organization that provides financial services to people and businesses who traditionally have difficulty accessing them. Here’s a breakdown of the key aspects:
- Non-Profit: They operate under Section 8 of the Companies Act 2013 in India, which means their primary goal is social good, not maximizing profits.
- Target Audience: They cater to underserved communities, including small businesses and individuals who wouldn’t qualify for loans from traditional banks due to factors like income level or lack of collateral.
- Financial Services: They offer various financial products, most importantly microloans – small, unsecured loans that can help people start or grow businesses, or cover unexpected expenses. They may also provide savings accounts or basic insurance.
- Regulation: The Reserve Bank of India (RBI) sets guidelines for Section 8 microfinance companies, including limits on loan amounts and interest rates. This ensures they operate responsibly and contribute to financial inclusion.
Definition of microfinance?
A microfinance loan is a small loan offered by special institutions to low-income individuals or businesses. These loans help people who wouldn’t qualify for traditional bank loans due to lack of credit history or collateral. The aim is to empower them to become self-sufficient.
Registering a Section 8 microfinance company involves several steps:
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN): These are essential for online form authorization by the directors.
- Apply for Name Approval: Choose a name reflecting the company’s Section 8 status and submit an application for approval.
- Draft and File Memorandum of Association (MoA) & Articles of Association (AoA): These documents define the company’s purpose and operational rules. File them with required documents after name approval.
- Submission of Documents: Submit all necessary documents, including MOA, AoA, and proof of identity/address for directors, to the Ministry of Corporate Affairs.
- Certificate of Incorporation Issuance: Upon successful registration, you’ll receive a Certificate of Incorporation, officially recognizing your Section 8 microfinance company.
Documents Required
It is very easy to register this type of business as very few documents are needed. The required documents include:
- Memorandum of Association (MoA) and Articles of Association (AoA)
- Certificate of Incorporation
- PAN Card copy of directors/promoters
- Identity & Address Proof of directors/promoters (Aadhaar, Passport etc.)
- Passport size photographs of directors/promoters
- Director's KYC Documents (Bank statements, Utility bills)
- Board Resolution Copy (approving establishment)
- Auditor's Certificate on Net Owned Funds
Benefits
- Financial Inclusion
- Empowerment
- Economic Development
- Simplified Process
- Lower Barrier to Entry
- Tax Benefits
Registration Duration
There isn’t a fixed timeframe for registering a Section 8 microfinance company. The processing time can vary depending on factors like the completeness of your application and workload at the Ministry of Corporate Affairs (MCA). It typically takes anywhere from a few weeks to a few months.