Section 8 Microfinance Company Registration

Section 8 Microfinance Company Registration

In small towns, farming villages, and crowded urban areas, one challenge repeats: access to money. Most people still don’t trust banks. Some even don’t have the documents banks ask for. Others are denied loans because they lack security. That’s where microfinance steps in. It offers small loans, without collateral, to people who are often left out. These loans help them start a shop, buy seeds, fix machines, or pay school fees

Now, if you want to help these people while following the law, you must register your company right. You can’t just lend money without rules. You need a legal path. In India, it’s registering a Section 8 Microfinance Company.

This guide explains how you can register a Section 8 Microfinance Company in India. We’ll walk through the cost, process, documents, and legal steps—without the jargon. If you’re serious about starting your journey in social finance, this is your first step

What Is a Section 8 Microfinance Company?

A Section 8 Microfinance Company is a type of non-profit organization. It is registered under the Companies Act, 2013. These companies don’t have any aim of earning profits. Instead, they work to promote social or economic development. In this case, through microfinance

They offer small loans, usually ranging from ₹5,000 to ₹1,00,000. Borrowers use the money to grow small businesses, handle emergencies, or meet daily needs. The idea is not just to lend money, but to create change

The best part? You can start this company without needing ₹5 crore in capital, which is otherwise mandatory for finance companies.

Who Can Start a Section 8 Microfinance Company?

You don’t have to be a finance expert. But you do need:

• A clear social mission (written in your company’s goals)
• Two or more directors
• A registered office in India
• A basic understanding of compliance and governance

Most founders are NGOs, social workers, development experts, or impact investors. But anyone with a lawful intent and clear vision can apply.

Key Features of Section 8 Microfinance Companies

Before you register, understand the basic rules:

• No profit motive: You can earn revenue, but profits must go back into the company.
• No dividend: You cannot pay profits to members.
• Legal borrowing and lending: You need approval to collect funds or offer loans.
• Low capital requirement: No ₹5 crore RBI requirement.
• Exemption from RBI license: RBI doesn’t regulate these companies directly. But you must still follow the Companies Act and other finance laws.

These features make it easier to start—but also come with duties.

Process to Register a Section 8 Microfinance Company

Step 1: Apply for Digital Signatures (DSC)

Each director needs a Digital Signature Certificate. This is required to file online forms.

•  Cost: ₹1,000–₹1,500 per DSC
•  Time: 1–2 days

Step 2: Apply for Director Identification Number (DIN)

Every director is required to have a Director Identification Number (DIN).
MCA issues this unique number.

•  Time: Instant, if DSC is valid

Step 3: Get Approval of Name through Reserve Unique Name

You must suggest two names in order of choice. The name must:

• Reflect the nature of work such as social, finance, welfare, etc.
• End with “Foundation”, “Association”, “Forum”, or similar

The Registrar gives the name approval if it’s not already taken.

•  Cost: ₹1,000
•  Time: 2–3 working days

Step 4: File for Section 8 License (Form INC-12)

This is the heart of your registration. Along with the form, you must submit:

• MOA (Memorandum of Association
• AOA (Articles of Association)
• Project plan
• Estimated income and expense (for next 3 years)
• Details of board members
• Declaration that profits will not be shared

Once approved, the government issues a license under Section 8.
Cost: ₹2,000–₹5,000 (varies slightly)
Time: 10–15 working days

Step 5: File SPICe+ Form (INC-32)

This is the final registration form. It includes:

• PAN and TAN application
• GST registration (optional)
• EPFO/ESI (for employee coverage, if applicable)
• Bank account opening details

Once approved, your company receives:

• Certificate of Incorporation
• PAN & TAN
• CIN (Corporate Identity Number)

Total Time: 25–30 working days from start to finish

List of Documents Required

For Directors

• PAN card
• Aadhaar card
• Passport-size photos
• Email and mobile number
• Address proof (bank statement, utility bill)

For Registered Office

• Rent agreement (if rented)
• NOC from owner
• Electricity/water bill (not older than 2 months)

Company Documents

• MOA (purpose and goals)
• AOA (rules of management)
• Financial projections
• Board resolution (if applicable)

Tip: Keep all scanned documents ready. File naming and clarity matter.

Cost Breakdown of Registration

Note: These charges vary by city and professional fees. You can apply directly or through service providers.

Why Choose Section 8 Over Other Options?

If your goal is to combine finance with social impact, this route is ideal.

• No RBI License Needed
• Low Entry Cost
• Clear Legal Identity
• Eligible for CSR & Govt. Grants
• Can Raise Funds Legally
• Can Offer Loans in Underserved Areas

Section 8 Microfinance Companies bridge the gap between charity and commerce. They don’t just give—they empower.

Common Mistakes to Avoid

• Picking a name without checking availability
• Not aligning MOA with your microfinance goals
• Failing to plan future compliance
• Forgetting the no-profit clause
• Not consulting a company secretary or lawyer

Get guidance early. Fixing mistakes later can cost both time and trust.

Conclusion

Finance is a powerful tool. Used right, it can lift entire communities. But power must come with rules. That’s why setting up a Section 8 Microfinance Company is more than about loans. It’s about building trust, creating structures, and staying compliant.

If you’re ready to take that step and need help, reach out to a trusted legal or compliance partner. Setting up right is the first step to scaling up strong.