Micro Finance Swot Analysis

Strengths

Intermediary in reducing the poverty: The main aim of ESAF Micro Finance is to provide various financial services for the promotion of sustainable livelihood and economic development. This in turn leads to considerable reduction in poverty which helps them to create trust and value for themselves in front of their various stakeholders.

Huge networking available: Currently ESAF comprises of huge member base consisting of 7 lakh members operating across 160 branches. Such a large scale operations helps in developing a good network connection with various stake holders such as Government, Local People, various banks etc.

Formal source: According to the World Bank report 80% of the Indian poor can’t access to formal source and therefore

In India around 350 million of the people are poor and only few MFIs there to serving them. Thus, ESAF provides them an opportunity by disbursing loan worth Rs.3005 crores which essentially helps in reducing this gap.

Employment Opportunity: ESAF provides employment opportunities to young professionals who can serve the poor and the needy by joining the organization.

Weakness

No proper regulation of MFI: In India the Rules and Regulation of Micro Finance Institutions are not regulated properly. In the absence of the rules and regulation ESAF observes high cases of credit risk and defaults which creates an adverse impact on their net worth.

Limited scope: ESAF is currently reaching out to almost 700 thousand poor households across six states in India covering the states of Kerala, Tamil Nadu, Maharashtra, Madhya Pradesh, Chhattisgarh and Jharkhand. However,the numbers are too less as compared to the other MFI’s. This also limits its scope of operation.

Opportunity

Extension of services: ESAF can try to expand its services to other less developed states like Odisha, Bihar, West Bengal etc. where there is a demand of institutionalized borrowings

Since microfinance institution like ESAF have very limited scope for operating their business. A banking license will essentially help them to improve their operations and business.

Threats

High Competition: This is a serious threat for ESAF.As MFIs have high transaction cost, entrant of the new players further aggravates this transaction cost making it worse. In such situation it has threats from different MFI institutions operating across the country. Also, Banks trying to expand their business in the rural areas create threats for the survival of MFI’s such as ESAF.

Neophyte Industry: Since ESAF and other MFI’s are relatively new, it is very difficult for them to understand & abide by the rules and regulation which are ambiguous in itself .In such situation non-compliance of rules & regulation can lead to severe damage.

Over involvement of Govt.: This is the biggest challenge that majority of the MFI in India are Facing. Political parties for their own benefit try to manipulate with rules and regulations which has an adverse impact on MFI such as ESAF.

4. Stake Holder’s Analysis

The major stake holders of ESAF microfinance are as