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Area
Bank
Microfinance
Focus
Profitability , Market Share , All segment of customer
A sustainable credit system for economically disadvantaged people.
Customer Acquisition
Banks mostly enroll customer through branches.
MFIs have stage-wise strategy-village meetings, formal groups, training of member of groups on financial management and then providing credit-line.
Products
Banks have a basket of retail product that cover savings, credit remittance etc.
MFIs specialize in credit .The product is predominantly a graduated credit line with recovery by specific week EMI.
Procedures
Banks have universally identical procedures as well as for internal management.
MFIs have a universally identical procedure for their customer for internal management.
Customer Service Mode
Customer access branches.
MFIs access customer at the location of their inhabitation.
Source of Funds
Combination of owned and Borrowed Capital
MFIs operated on Borrowed fund
Cost of Capital
Average cost of Capital for Bank is8 percent
Average cost of capital for MFIs is %
Location of Operation
Banks have a formula to determine viability of a branch. This determines the availability of the bank in geographical location.
MFIs operate with families that do not have steady and small credit lines from banks. They do not operate on the basis of geographical location.
Nature of Institution
Financial Institution
Service Institution
Financial Goal
Profit maximization
Surplus to sustain
