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Microfinance institutions play a key role in providing financial services to individuals and small ventures without access to established banking systems. If you want to start a microfinance firm, you must first understand the microfinance company registration process and follow all the requirements. Here is a step-by-step guide to help you with the process.

Step 1: Conduct market research before microfinance company registration

The first step in starting a microfinance company is to conduct in-depth, thorough market research.

Here are some of the crucial factors to consider in the research:

  • Identify the potential market that you want to target and understand their preferences.

  • Analysing the competition is crucial to setting yourself apart from your competitors.

  • Understand your potential customer base, which you can reach practically with your effective marketing efforts and strategies.

Tip: We, as experts in company formation services, can help you provide the in-depth knowledge and required information. It will surely help you sort the market and understand your target and goal.

Step 2: Develop a business plan for the microfinance company

Similar to any other business setup, microfinance companies need well-established business plans to achieve success. For instance, if you are planning to start a business, then the plan must outline your missions, potential market, products and services, financial projections, business operational strategies, and adequate risk management techniques and plans. This entire layout will serve as a map for your venture and help guide you down the right path.

Step 3: Choose a legal structure for your microfinance company

With defined market research and a business plan, you can decide on a legal structure for sustainable business operations and long-term profit. Microfinance institutions can be set up as private or public limited companies. If you are planning to initiate a venture, choose a legal structure that suits your requirements.

Tip: As a renowned corporate legal advisor in Kolkata, we can advise you on the legal structure based on the goal and objective. We’re ready to help you with the drafting and filing of the necessary documents for your microfinance company registration.

Step 4: Obtain the necessary licences and registrations

Depending upon the location and legal structure of your MFI venture, you may need to obtain the required licences and registrations from the government to smoothly run the operations. This may include:

  • The first step is to register your microfinance company with the appropriate government agency.

  • You need to get a licence from the RBI to operate as a microfinance company. The application for the required licence must be filled out manually, and the applicant is required to submit a scanned copy with additional necessary documents.

  • Obtaining a tax identification number and registration for business-relevant taxes such as income tax, value-added tax, and GST is necessary.

  • Depending on the location and operation of the venture, you may need additional licences, such as data protection and consumer protection.

Step 5: Secure funding for microfinance company registration

Microfinance entities require a notable amount of capital to operate; therefore, there are some funding sources available, including:

  1. Crowdfunding
  2. Debt funding
  3. Equity fundings
  4. Grants and donations

Tip: MPVD associate experts can provide legal support throughout the financial arrangements. We can help you with the bookkeeping and accounting and help you maintain the financial statements.

Step 6: Comply with ongoing regulatory requirements

Once you establish the MFI setup, you are bound to maintain regulatory requirements to ensure financial stability, consumer protection, and transparency. The following process may include:

  • Regular submission of financial statements, audited statements, and other required documents to the authority.

  • Implementing robust consumer protection policies, such as fair lending practices and transparent pricing.

Step 7: Monitor and evaluate performance

Regular monitoring and evaluation of the business institution is necessary to ensure long-term sustainability and impact. These include:

  • Tracking of financial performance

  • Measuring social impact

  • Continuous improvement

  • Gathering feedbacks

Initiating with an MFI, or microfinance institution, can be a complex process for you to manage alone while following the guidelines. By collaborating with MPVD Associates, your microfinance company registration process can be less complex, helping to mitigate the risks with effective strategies.

FAQs – Microfinance Company Formation in India

To register, you need to submit the following documents:
  1. A filled-out application form
  2. A business plan
  3. Proof of capital
  4. Identification documents of the owner and directors.
However, some regulatory bodies may also ask for risk management plan documents.
The registration fee for establishing NBFC-MFI in India is 50,000 INR. However, the fees may vary depending on the state and regulatory authorities.
According to the RBI, the minimum capital requirement in India is Rs. 1 lakh. This capital ensures that the company has enough backup to sustain its operation and manage the potential risk factors.
The step-by-step procedure for setting up a microfinance company in India. Step 1: Documentation Step 2: Incorporate your company Step 3: Ensure capital adequacy Step 4: Deposit capital Step 5: Apply for a RBI licence digitally Step 6: Submit the application to the RBI regional office
The RBI is the regulatory authority that regulates the operations of microfinance institutions. Therefore, it is mandatory to register as an NBFC-MFI with the authority to carry out operations smoothly.
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