REGULATION OF AFFILIATION WITH MICROFINANCE INSTITUTIONS
Sahulat Micro-finance Society can associate with any Cooperative Credit Society which fulfils the following conditions:
- The Cooperative society is willing to subscribe to the basic vision of Sahulat which is "to provide interest free micro-finance options for removing socio-economic disparities and to achieve justice and equity for educationally and financially backward sections of the public at large."
- It is registered either under the Co-Operative Society Act of State in India or under the Multi-State Co-operative Societies Act.
- The concept of interest free microfinance should be properly recorded in its Bye Laws and the Cooperative society is functioning on interest-free principles.Sahulat defines cooperative society as per below texts: "A Cooperative Credit Society is created by members for pooling their funds and creating loanable funds therefrom for addressing their liquidity demands from time to time, mutually sharing the operational cost and owning the benefit and risk of operations."
It is also desirable from the affiliated Cooperative Credit societies that:
- Its governance structure is well defined and in consonance with the co-operative principles.
- It fulfils the statutory requirements including filing returns with the Registrar or Central Registrar of the respective liberal Co-operative Act or the Multi State Co-operative Societies Act and compliances to the Income Tax Act. In other words it should comply with all relevant statutes.
- It tries to observe the following credit norms as far as possible:
a. 25% of the credit should be on the basis of service charges.
b. 25% of the credit should be on the basis of Musharaka (Partnership) and Mudharaba (Sleeping/passive Partnership).
c. 50% of the credit should be on the basis of Murabaha (Cost plus Contracts) and Ijara (Leasing).
- It should try to minimise the Service charge and in no case the Service Charge should be taken as a source of profit and it should be levied only to recover actual administrative/operating expenses.