To register a Section 8 Microfinance Company, start by obtaining Digital Signature Certificates (DSCs) for all proposed directors, which are essential for signing online forms. Next, apply for Director Identification Numbers (DINs) for each director through the Ministry of Corporate Affairs (MCA) portal. Reserve your company name using the RUN (Reserve Unique Name) service on the MCA portal.
Prepare and submit the SPICe+ form on the MCA portal along with the necessary documents, including the Memorandum of Association (MOA) and Articles of Association (AOA). File Form INC-12 for seeking a license under Section 8 and any other required forms. Once the Registrar of Companies (RoC) approves your application, you will receive the Certificate of Incorporation.
For microfinance activities, you might also need to apply for a Non-Banking Financial Company (NBFC) license from the Reserve Bank of India (RBI), depending on your activities.
Section 8 microfinance company
A Section 8 Microfinance Company is a type of non-profit organization in India established under Section 8 of the Companies Act, 2013. Its primary purpose is to provide financial services, such as small loans and savings options, to economically disadvantaged individuals who lack access to traditional banking services. Unlike profit-driven companies, these organizations focus on social welfare and financial inclusion, aiming to support economic development and improve the financial well-being of low-income communities. They operate under regulatory guidelines to ensure transparency and are often required to obtain a license from the Reserve Bank of India (RBI) for their microfinance activities.
Definition of a Microfinance Loan
- Small-Scale Loan: A microfinance loan is a small, short-term loan provided to individuals or businesses with limited access to traditional banking services.
- Targeted to Low-Income Individuals: These loans are primarily aimed at economically disadvantaged individuals or small enterprises in developing or low-income regions.
- No Collateral Required: Microfinance loans often do not require traditional forms of collateral, making them accessible to borrowers who lack assets.
- Promotes Financial Inclusion: The primary goal is to enhance financial inclusion by providing affordable credit to those who are excluded from mainstream financial systems.
- Flexible Terms: Microfinance loans typically offer flexible repayment terms and conditions, tailored to the borrower’s income and repayment capacity.
These loans play a crucial role in supporting economic growth and improving the livelihoods of people in underserved communities.
Benefits of Section 8 Microfinance Company
- No RBI Approval required
- Can lend Unsecured loan
- No Demographic Barrier
- Best Rate of Interest
- Minimum capital not required
- Defaulters can be sued for non-payment
- Limited Compliances
Section 8 Microfinance Company Registration: Simplified 5-Step Process
- Obtain DSC and DIN: Begin by acquiring Digital Signature Certificates (DSCs) for all proposed directors and apply for Director Identification Numbers (DINs). DSCs are needed to sign electronic documents, while DINs are essential for all directors to be recognized officially.
- Reserve Company Name: Use the RUN (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) portal to reserve your company name. Ensure the name complies with regulatory guidelines and is unique.
- Prepare and File Documents: Draft the Memorandum of Association (MOA) and Articles of Association (AOA) reflecting the non-profit nature of your organization. Submit these documents along with the SPICe+ form on the MCA portal, which consolidates various registration requirements.
- Apply for Section 8 License: File Form INC-12 to apply for a license under Section 8 of the Companies Act, 2013. This license is necessary for operating as a non-profit entity with social welfare objectives.
- Receive Incorporation Certificate and Comply with Regulations: After approval, you’ll receive the Certificate of Incorporation from the Registrar of Companies (RoC). If required, apply for a Non-Banking Financial Company (NBFC) license from the Reserve Bank of India (RBI) and complete any additional compliance requirements, such as obtaining PAN and TAN.