The maximum loan amount for microfinance can extend up to Rs. 20 lakh, primarily for Self Help Groups (SHGs). However, the specific maximum loan amount for microfinance varies depending on the type of group applying for the loan and the policies of the financial institution.
Microfinance aims to provide small loans and other financial services to low-income individuals or groups who typically lack access to conventional banking services. These loans are often structured to support income-generating activities and empower beneficiaries.
Microfinance Loan Limits by Group Type
Financial institutions offer different maximum loan amounts based on the structure of the borrowing group. Two common types of microfinance groups are Self Help Groups (SHGs) and Joint Liability Groups (JLGs).
Here's a breakdown of typical loan limits:
| Group Type | Minimum Loan Amount | Maximum Loan Amount |
|---|---|---|
| Self Help Groups (SHGs) | Minimum of 6 times the existing corpus or Rs. 1.5 lakh, whichever is higher | Rs. 20 lakh |
| Joint Liability Groups (JLGs) | Rs. 0.10 lakh | Rs. 10 lakh (or Rs. 2 lakh per member, whichever is lower) |
Understanding the Loan Ceilings
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Self Help Groups (SHGs): For SHGs, which are typically small groups of people who come together to save money and provide mutual support, the maximum loan amount can reach Rs. 20 lakh. The initial loan amount for SHGs is often determined by their existing savings (corpus), ensuring a base level of financial discipline.
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Joint Liability Groups (JLGs): JLGs consist of a small number of individuals who come together to avail loans without collateral, based on their mutual guarantee. For JLGs, the maximum loan amount per group is capped at Rs. 10 lakh. Additionally, there's a per-member cap of Rs. 2 lakh. The group's total loan amount will be the lower of these two conditions.
- Practical Insight for JLGs:
- If a JLG has 4 members, the maximum per-member limit would allow for Rs. 8 lakh (4 members * Rs. 2 lakh/member). Since Rs. 8 lakh is lower than the Rs. 10 lakh group cap, the maximum loan for this group would be Rs. 8 lakh.
- If a JLG has 6 members, the maximum per-member limit would be Rs. 12 lakh (6 members * Rs. 2 lakh/member). However, the overall group cap is Rs. 10 lakh. In this scenario, the lower amount, Rs. 10 lakh, would be the maximum loan for the group.
- Practical Insight for JLGs:
It's important to note that these figures represent a general guideline, and specific terms and conditions can vary by financial institutions offering microfinance products. For detailed information on micro-loan offerings and eligibility criteria, one can refer to specific financial institutions' guidelines.
