Can ngo do microfinance as an element of poverty alleviation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2013 Hi

I want to know whether an NGO engaged in Health, Education , NRM and other activities does microfinance as one of the activities to empower SHG woment therby increasing their income earning power and bringing them out of poverty. Will it be considered as a commercial activity by the Income Tax laws.

Rashid Mehmood

Rashid Mehmood (Expert)
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20 March 2013 Yes, an NGO can operate the micro finance program at the community level in the area of its operation, but it should have been provided in the MOA, if not decided in core business in the MOA then the NGO must obtain approval from the SEC and amend its MOA.

If the NGO intend to shift to a micro finance institute then it should raise its paid up capital upto the required capital for banking companies and must obtain approval from SEC and state bank as well.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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18 July 2013 Yes I agree with the expert and in addtion I would like to say

Micro Finance and NGOs
“Self realization and self initiative are the two most powerfulweapons to wash poverty out from the world” – Chanakya
®

World’s Greatest Ancient Economic and Political Scholar
Non-Governmental Organizations and voluntary action havebeen part of the historical legacy
1
. In the context of contemporarysocial empowerment, self realization and self initiative is the base forthe formation of self help groups. This is the logic motivated NGOs toform SHGs in rural areas to empower them through developing theirinherent skills. Thus, SHG movement among the rural poor in differentparts of the country is emerging as a very reliable and efficient modefor technology transfer
2
. Chanakya’s philosophical statement hastransformed into the SHGs with the help of NGOs and their efforts.Microfinance is the tool to empower the rural poor and also tool againsthuman deprivation. Microfinance is motivating sustainabledevelopment through the supportive NGOs.As a responsible welfare state in the democratic systems, it canbe also say that the growth of micro-finance in India has been inresponse to the failure of institutional initiatives of rural credit systemand involvement of informal credit system. Rural credits especiallyrural cooperatives. This is led to establishment of microfinanceinstitutions under the guidelines of NABARD.

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