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A Microfinance Company is a financial institution that provides small loans (microcredit) and other financial services to low-income individuals and communities typically overlooked by traditional banks. These include farmers, daily wage earners, small shopkeepers, and women entrepreneurs who often lack credit history or collateral.
Total Loans Disbursed
Active Borrowers
Non-Banking Financial Company - Microfinance Institution
Non-Profit Micro-Credit Institution
| Feature | NBFC-MFI | Section 8 Company |
|---|---|---|
| Primary Objective | Commercial profit through micro-lending | Social impact through non-profit micro-credit |
| Main Regulator | Reserve Bank of India (RBI) | Ministry of Corporate Affairs (MCA) |
| Minimum Net Owned Fund | ₹5 crore (₹2 crore for NE states) | No minimum capital requirement |
| RBI Approval | Mandatory (Certificate of Registration) | Generally not required for micro-credit |
| Profit Distribution | Can distribute to shareholders | Must be reinvested for social objectives |
| Compliance Level | High (strict RBI guidelines) | Moderate (mainly MCA compliance) |
| Setup Complexity | More complex and time-consuming | Simpler and faster to establish |
| Funding Sources | Banks, financial institutions, investors | Grants, donations, institutional loans |
| Tax Benefits | Standard corporate taxation | Eligible for tax exemptions |
While often used interchangeably, "microfinance" and "micro-credit" have distinct meanings in the financial inclusion ecosystem.
"Micro-credit is about giving small loans to help people start or expand businesses."
"Microfinance is about comprehensive financial services to uplift entire communities."
While all micro-credit is part of microfinance, microfinance encompasses much more than just lending. A Section 8 company typically focuses on micro-credit as part of its larger social mission.
Company Incorporation under Companies Act, 2013: The first step for any microfinance business is to register as a legal entity with the Ministry of Corporate Affairs (MCA).
₹5 crore for most of India
₹2 crore for Northeastern states
NOF = Company's actual owned funds minus debts and intangible assets
Directors must have relevant experience in financial services (banking/finance)
Ensures responsible management and compliance
Mandatory Certificate of Registration (CoR) from RBI before commencing operations
Must promote charitable purposes: education, social welfare, environmental protection, etc.
All earnings must be reinvested for social goals
No specific NOF requirement like NBFC-MFI
Makes it accessible for social entrepreneurs
Generally no RBI license required for micro-credit activities
Main regulator is Ministry of Corporate Affairs
Minimum 2 directors (at least one Indian resident)
Directors ensure adherence to non-profit mission
Gather ₹5 crore (₹2 crore for NE states) as company's owned funds
This demonstrates financial stability to RBI
The complete NBFC-MFI registration process typically takes 4-6 months, depending on document completeness and RBI processing time. Operations can only commence after receiving the RBI Certificate of Registration.
Due to RBI approval process and capital requirements
Simpler process with no RBI approval needed
₹20,000 – ₹50,000+ (for legal/CA assistance)
₹25,000 – ₹60,000
(₹2 Crore for Northeastern states)
The ₹5 crore NOF is not a fee but capital that must be maintained in the company. The RBI application fee of ₹3 lakh is non-refundable even if the application is rejected.
Lower upfront costs (₹25-60K)
No minimum capital requirement
Faster setup (15-30 days)
Higher investment (₹3L fees + ₹5Cr capital)
Strict capital requirements
Longer process (4-6 months)
While Section 8 companies don't need direct RBI licenses for micro-credit activities, they must follow RBI's fair lending norms and regulatory framework.
Annual household income ≤ ₹3,00,000
(Applies to both rural & urban households)
Initial: Up to ₹1,25,000
Maximum: Up to ₹2,00,000
Based on repayment history and capacity
Primary objective is social impact, not profit maximization. All surplus must be reinvested for charitable purposes.
Avoids lengthy and complex RBI approval process, enabling faster setup and commencement of operations.
No ₹5 crore NOF requirement, making it accessible for social entrepreneurs and community initiatives.
Eligible for tax exemptions under Section 12A and 80G of Income Tax Act, enhancing financial sustainability.
Primarily governed by MCA with simpler ongoing compliance compared to RBI-regulated NBFC-MFIs.
Can receive grants, donations, and institutional funding due to non-profit status, supporting mission sustainability.
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Our specialists guide you through company law and RBI-related requirements to ensure smooth and correct registration.
From document collection to final submission, the entire process is handled online for maximum convenience.
We prepare and review all required documents carefully to reduce errors and avoid unnecessary delays.
We follow a clear pricing policy with no hidden charges, making our services affordable for new microfinance ventures.
Our team stays with you at every stage, answering queries and keeping you informed about application progress.
Even after registration, we help you understand compliance requirements and next steps for smooth operations.
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