How Section 8 Microfinance Registration Encourages Social Entrepreneurship Through Government Grants? This article discusses how Section 8 Microfinance Registration provides access to NABARD loans, government grants, and other financial gains.
How Section 8 Microfinance Registration Encourages Social Entrepreneurship Through Government Grants? This article discusses how Section 8 Microfinance Registration provides access to NABARD loans, government grants, and other financial gains.
Key Takeaways
- How Section 8 Microfinance Registration Encourages Social Entrepreneurship Through Government Grants?
- This article discusses how Section 8 Microfinance Registration provides access to NABARD loans, government grants, and other financial gains.
- The Relationship Between Section 8 Microfinance Companies and Government Grants Another benefit of registering your microfinance company under Section 8 is the ability to receive financial assistance from the government.
- Eligibility for Government Schemes With the registration of your Section 8 Microfinance Company, you become eligible for several schemes run by the government for promoting financial inclusion.
- Section 8 Microfinance Company Registration Fees The cost of registering a Section 8 Microfinance Company is significantly lower than that of an NBFC-MFI, but there are still some essential fees involved.
How Section 8 Microfinance Registration Encourages Social Entrepreneurship Through Government Grants?
The inclusion revolution in India is moving away from philanthropy and more towards empowerment. For people who want to deliver their financial services to communities lacking them, Section 8 Microfinance Company Registration serves best. This type of non-profit business helps you provide small loans to people who do not have bank facilities, as well as benefit from grants from the government.
This article discusses how Section 8 Microfinance Registration provides access to NABARD loans, government grants, and other financial gains.
In India, the concept of financial inclusion is moving away from being driven by charitable motives to being about sustainable empowerment. If you’re someone who wants to make a difference in society through financial services, then you should know that setting up your company as an 8 Microfinance Company under Section 8 is a great option for you.
What is a Section 8 Microfinance Company?
A Section 8 Microfinance Company is a non-profit association that is incorporated under Section 8 of the Companies Act, 2013. The purpose behind incorporating a Section 8 company is to advance commerce, arts, sciences, social welfare, education, and other similar charitable activities, with an emphasis on microcredit lending to those who lack access to conventional banking services.
Contrary to other profit-making firms, the main purpose behind the incorporation of a Section 8 Microfinance Company is to provide social welfare. No portion of the surplus will be distributed among the members, but instead, all the surplus should be used for furthering the objectives of the company.
The Relationship Between Section 8 Microfinance Companies and Government Grants
Another benefit of registering your microfinance company under Section 8 is the ability to receive financial assistance from the government. The Indian government, alongside several organizations like NABARD (National Bank for Agriculture and Rural Development), allocates a considerable amount of funds for the development of microfinance institutions (MFIs) targeting the unbanked communities.
Eligibility for Government Schemes
With the registration of your Section 8 Microfinance Company, you become eligible for several schemes run by the government for promoting financial inclusion. These grants enable the microfinance companies to offer important services to the disadvantaged populations that do not have easy access to banks. For example, the Ministry of Rural Development and NABARD make available lots of money for these schemes.
After registering, you may avail yourself of the Grant-in-Aid scheme, where you will receive financial assistance if you can distribute loans among the rural masses.
Qualification of Start-Up Village Entrepreneurship Programmes (SVEP)
SVEP refers to a scheme where seed capital is offered to micro-enterprises in villages through microfinance schemes. This government-sponsored project normally partners with microfinance firms registered as section 8 Microfinance Company to offer loans and grant aid to small scale business ventures.
If your micro finance firm is registered as section 8, then you can apply for this kind of funding. In effect, this will increase your firm's capacity to engage in both microloans and entrepreneurship projects in rural India.
Eligibility for 12A and 80G Registrations for Tax Exemptions
In addition, Section 8 Microfinance Companies are eligible to obtain certifications in relation to Section 12A and 80G of the Income Tax Act. By getting such certification, your organization will be able to:
- Accept tax-exempt contributions from foundations linked to governmental agencies and corporations.
- Apply for Corporate Social Responsibility (CSR) funding, which is often an excellent way to earn money.
With 12A and 80G registrations, you will significantly expand your fundraising possibilities, because many corporations tend to donate to organizations with 80G status for their CSR purposes.
Advantages of Section 8 Microfinance Company Registration Over Other Organizational Forms
Lesser Capital Requirement
In comparison with other forms of financial institutions like the NBFC-MFIs (Non-Banking Financial Companies - Microfinance Institutions), the Section 8 Microfinance Company Registration has very low capital requirement. An NBFC-MFI needs to have a Net Owned Fund (NOF) of minimum ₹5 crore. However, the capital requirement for the Section 8 microfinance company registration is much lower, thus making it easier for grassroots-level people having limited funds.
The relatively lower capital requirement makes Section 8 microfinance company registration an apt option for people who want to set up microfinance institutions on a small scale.
Free From RBI Regulations
Another important benefit of registering as an MFI under Section 8 is that these entities are free from the rigid RBI regulations applicable for NBFC-MFIs. To become a member of NBFC-MFIs, one needs to ensure capital adequacy, be of substantial net worth, and follow certain guidelines set out by RBI. However, Section 8 MFIs are exempted from the above conditions provided they conform to certain conditions like restrictions on interest rates and loan amounts. Such ease attracts grants made by the government as well as international agencies.
Section 8 Microfinance Company Registration Fees
The cost of registering a Section 8 Microfinance Company is significantly lower than that of an NBFC-MFI, but there are still some essential fees involved. These include:
Digital Signature Certificate (DSC) & DIN:
All directors of the company must obtain a DSC and DIN, which are required to sign and file the incorporation documents online.
Name Approval:
You must file the RUN (Reserve Unique Name) application to reserve the name of your Section 8 Microfinance Company with the Registrar of Companies (RoC).
License Fee:
The Section 8 License Fee is payable to the government for operating a non-profit entity. This fee can vary by state and other factors.
Professional Fees:
Hiring a legal or financial professional to draft the MoA and AoA, is essential, as these documents need to define the company’s social mission and microfinance objectives.
How to Incorporate a Section 8 Microfinance Company and Apply for Funding?
Incorporating a Section 8 Microfinance Company requires certain steps to be taken. Below are details about those steps:
Planning:
- Choose at least two directors for your company.
- Decide on the geographical location where your company will work (such as rural areas of Rajasthan or Uttar Pradesh).
Company Registration:
- Fill out the Spice+ application form to register your microfinance company via the MCA portal.
Licensing:
- Get your Section 8 License from RoC (Registrar of Companies).
Compliance:
- Make sure to register for PAN, TAN, and GST immediately.
- Sign up for the NGO Darpan website via NITI Aayog to get funding from the government.
Getting Certificates:
- Go ahead and obtain your certificates, i.e. 12A and 80G.
Conclusion: Leveraging Financing Options via Section 8 Microfinance Company Registration
Getting a Section 8 Microfinance Company registered can be highly advantageous for entrepreneurs who seek to offer financial services to disadvantaged groups in India. Such an effort unlocks access to government grants, credit at favorable interest rates, and funds from NABARD. This process is relatively easy and comes with various advantages, including reduced capital, no RBI regulations, and tax exemptions according to sections 12A and 80G.
At Vakilkaro, we have extensive experience in offering Section 8 Microfinance Company Registration, NBFC, and Section 8 NGO Registration Services. Our team will be happy to help you navigate this process efficiently.
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Frequently asked questions
How Section 8 Microfinance Registration Can Help You Access Government Grants?+
How Section 8 Microfinance Registration Encourages Social Entrepreneurship Through Government Grants? This article discusses how Section 8 Microfinance Registration provides access to NABARD loans, government grants, and other financial gains.