It is a one stop solution for all kind of Registration or Compliance Requirement.
A Section 8 microfinance company is an organisation that provides finances, to individuals or groups that do not have access to traditional banking services. These institutions are designed to serve low-income individuals and small businesses that may not be eligible for loans from conventional banks due to a lack of collateral or a poor credit history. Microfinance companies provide small loans, often in the form of microfinance loans, that are designed to meet the needs of these underserved populations. These companies are introduced to ease the credit system for small businesses, as they don’t get a loan from banks due to their complex process. Therefore, it is commonly known as a microcredit or microbenefit organization.
In addition to loans, section 8 microfinance companies also offer business training and support, to help their clients grow their businesses and improve their financial situation. The goal of these institutions is to promote financial inclusion and economic development in underserved communities by providing access to capital and other financial services.
A minimum of two shareholders and directors are required for the registration of a Section 8 Micro Finance Company.
There is no minimum capital requirement as in the case of Nidhi companies and NBFCs.
For the purpose of the registered office of the company, commercial space is not mandatory. Rented premises can also be used as the registered office of the company.
The name of the Section 8 Micro Finance company should be unique, and it shall not contain any offensive words. The name shall not contain any registered trademark.
Names must end with the words Foundation, Federation, Association, Council, etc.
There are several benefits of microfinance companies, both for the individuals and communities they serve as well as for the wider economy:
Access to Capital:
Access to capital is one of the main benefits of microfinance companies. By providing small loans and other support services to individuals and businesses who might not otherwise have access to traditional banking services, microfinance companies help increase access to capital for those who need it most. This can be particularly important for low-income individuals and small businesses, who might not have the collateral or credit history required to secure a loan from a traditional bank.
Financial Inclusion:
Financial inclusion is another key benefit of microfinance company. By providing financial services to people who might otherwise be excluded from the formal financial system, these companies help to promote financial inclusion and reduce poverty. This can be particularly important for low-income individuals and small businesses, who may not have access to traditional banking services or may not be eligible for loans from banks due to their financial situation.
No RBI approval is required:
The RBI regulates the finance industry in India. But section 8 microfinance companies are exempt from RBI registration. So they can start business without RBI approval.
Unsecured Loans:
Section 8 microfinance companies, have the advantage of being able to provide unsecured loans (personal loans, group loans, etc.) to individuals and small businesses. Unsecured loans, such as personal loans or group loans, can be particularly beneficial for low-income individuals and small businesses who might not have the collateral or credit history required to secure a loan from a traditional bank. By providing unsecured loans, microfinance companies can help increase access to capital for those who need it most, encouraging entrepreneurship and supporting the growth of small businesses.
Job Creation:
By providing access to capital, microfinance companies can help create jobs and stimulate economic activity. This can have a positive impact on the local economy and help reduce poverty in the community.
Empowerment of Women:
Many microfinance companies target women as their primary clients, helping to empower them and provide them with greater economic opportunities. This can help reduce gender inequality and improve economic outcomes for women and their families.
Improved Livelihoods:
By providing access to capital, microfinance companies can help individuals and businesses improve their livelihoods and achieve their financial goals. This can help increase economic activity and reduce poverty in communities.
Encourages Entrepreneurship:
Microfinance companies can provide financial support to entrepreneurs and small businesses, which can help to encourage entrepreneurship and promote innovation. This can drive economic growth and create opportunities for people to start or grow their businesses.
No area limitation:
Like Nidhi companies, Section 8 Micro finance company does not have any working area limitations. They can operate on a pan-India basis.
For registering a Section 8 Micro finance company following documents are required from both directors/shareholders.
Passport-size photographs.
Copy of the Pan Card
Copy of Identity Proof (Aadhaar Card/Voter Card/Driving Licence/Passport)
Copy of address proof (any latest utility bill or bank statement)
Copy of one address proof for the registered office of the company (any latest utility bill)
NOC/Rent Agreement for using the premises as the registered office of the company
The first step in the registration of a Section 8 microfinance company is an application for digital signature (DSC). DSC is required for signing the documents that we will upload on the MCA portal. Individual’s photo, Pan Card, and Aadhaar Card are required for digital signature application.
Our team will help you select a unique and attractive name for your company. After the selection of the name, we will apply for the name approval of the company. A name reservation application can be filed in Form Spice+ Part A.
Once the name is approved, our team will draft the documents that are required for the registration according to the formats prescribed by the government. Once the documents are drafted, we will share the draft documents with you for signing. You have to share signed documents with us.
After completion of all the documentation work, we will upload forms for the registration of the company. Form Spice+ Part B is used for filling out incorporation documents. In this form, we can apply for a Certificate of Incorporation, Section 8 Licence, PAN, TAN, PF, and ESI.
After filling out the Spice+ Part B form, the registrar will check all the documents, and if they are to his satisfaction, he will issue a certificate of incorporation in digital form.
| SL. No. | Basis of Difference | Nidhi Company | Section 8 Microfinance company |
|---|---|---|---|
| I. | Minimum No. of Members and Directors Required | A minimum of seven members and three directors are required. | A minimum of two members is required. |
| II. | Minimum capital required | Minimum Ten Lakhs in paid-up capital is required for registration. | No such Requirement. One can start a Section 8 microfinance company with Rs. 10,000 as well. |
| III. | RBI approval | RBI approval is not required. | RBI approval is not required. |
| IV. | Compliances | High-cost Compliances. | Less compliances. |
| V. | Loans | Can only give secured loans. | Can only give unsecured loans. |
| VI. | Objectives | They are incorporated to encourage the savings of the people and create funds for their own members. | These companies provide financial assistance to weaker sections of society for their socio-economic development. |
| VII. | Deposits | Nidhi Company can take deposits from its members. | A Section 8 microfinance company cannot take deposits. |
| VIII. | Working area limitations | Nidhi Company can only work in the district where its registered office is situated. | There is no such restriction in the case of section 8 microfinance companies. They can operate on a pan-India basis. |
A Section 8 microfinance company is a financial institution that provides collateral-free small loans to individuals and small businesses that typically lack access to traditional banking services. Microfinance companies aim to promote financial inclusion and alleviate poverty by providing credit to low-income individuals and communities.
For the registration of a section 8 microfinance company, a minimum of two members are required.
The benefits of a Section 8 microfinance company include financial inclusion, poverty alleviation, women's empowerment, entrepreneurial growth, etc.
There is no such requirement. You can start with Rs. 10,000 also.
The interest rate that a Section 8 microfinance company can charge borrowers is regulated by the Reserve Bank of India (RBI). It can charge up to 26% per year.
Yes, a microfinance company can charge a processing fee for loans given to its borrowers. Processing fees are charges that are levied by financial institutions for the services provided in processing a loan application, such as credit appraisal, documentation, and verification. The maximum processing fee that can be charged by microfinance companies is 1% of the loan amount.
No, a section 8 microfinance company cannot give secured loans. They can give unsecured loans only.
No, a section 8 company cannot accept deposits from the public.
Section 8 micro finance companies are exempt from RBI approval. They are regulated by the Ministry of Corporate Affairs.
We have a team of qualified professionals who are experts in the registration and compliance requirements of Section 8 micro finance companies. Our team will help with registration and compliance in a very smooth and ethical manner.