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Section 8 Microfinance Company Registration | Taxhint Advisors

Section 8 Microfinance Company Registration

Expert assistance for registering your microfinance company under Section 8 of the Companies Act, 2013.

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What is a Section 8 Microfinance Company?

Providing financial aid to businesses excluded from formal banking systems

A Section 8 Microfinance company is registered under the Indian Companies Act, 2013 with the objective of providing financial aid to small business groups that are excluded from the formal banking system.

Microfinance Loan Definition

A household with an annual income of up to ₹3,00,000 can get a microfinance loan without any collateral. The loan should not have any lien on the borrower's deposit account to ensure it remains collateral-free.

Key Features

  • Registered as a non-profit under Section 8
  • No RBI license required (with guidelines compliance)
  • Can charge interest up to 26% p.a.
  • No demographic barriers
  • No minimum capital requirement
  • Can lend unsecured loans

Registration Process & Requirements

Step-by-step guidance for your Section 8 Microfinance Company registration

Documents Required

  • Aadhaar card and PAN of directors
  • Recent bank statements of directors
  • Address proof documents
  • Passport size photos
  • Contact details (phone & email)
  • Utility bills

Registration Process

Secure Digital Signature Certificate (DSC) and Director Identification Number (DIN) for company formation and electronic form authorization.

Submit application for name approval (Form INC-1) with terms like "Sansha", "Foundation", or "Micro Credit" to indicate Section 8 registration.

Prepare and file Memorandum of Association (MOA) and Articles of Association (AOA) with required documentation.

Submit all documents including incorporation certificate and Form INC-12 to obtain license.

Registration Fees

The registration fees vary based on authorized capital:

  • Government fees (DSC, DIN, name approval, COI): ₹5,000 to ₹2+ lakhs
  • MOA/AOA drafting charges: Starting from ₹5,000
  • PAN/TAN registration fees

Contact us for exact fee structure based on your company's requirements.

Latest RBI Guidelines for Section 8 Microfinance Companies

Stay compliant with updated regulations

  • Monthly repayment cap: 50% of household's monthly income (max ₹12,500 for ₹3 lakh annual income)
  • No prepayment penalties: Borrowers can repay early without charges
  • Transparent disclosure: Clear communication of interest rates and charges
  • Loan definition: Collateral-free loans to households earning ≤ ₹3,00,000 annually
  • Loan amount: Can be expanded up to ₹2,40,000
  • NBFC-MFI license: Requires 75% of assets in microfinance
These guidelines aim to strengthen the microfinance sector by ensuring fair practices and protecting low-income borrowers.

Frequently Asked Questions

Get answers to common queries about Section 8 Microfinance Companies

Yes, a Section 8 Company is a convenient option for setting up a Micro Finance Company in India as per the MCA. It doesn't require extra fees or security deposits and can offer loans at low interest rates as suggested by RBI and the central government.

Trusts can be formed in 10-15 days with lower costs, while Section 8 Companies take 60-75 days to form. The choice depends on your specific requirements and long-term objectives.

A Section 8 company can be formed either with a limited share capital or a limited guarantee (with or without share capital).

Section 8 companies cannot distribute profits to members and may face more instability than other company types. However, they enjoy certain tax benefits.

A Section 8 Company is incorporated under the Companies Act to promote commerce, science, art, charity, religion or other useful objects, while an NGO is an organization working for social causes. Section 8 Companies can get government funding more easily.

Micro Finance Company Registration by State

Micro Finance Company Registration by City

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