SECTION 8 MICRO FINANCE COMPANY REGISTRATION

What is a Section 8 Micro Finance Company?

A Section 8 Micro Finance Company is a non-profit legal structure under the Companies Act, 2013, formed to provide small loans, credit, and other micro-finance services to underserved or low-income segments of society. Unlike NBFCs or regular finance companies, these companies function without any profit motive. Their main aim is social upliftment through responsible lending.

They are ideal for NGOs, CSR-backed projects, community cooperatives, SHGs (Self Help Groups), and social entrepreneurs. Section 8 Companies are eligible for various government benefits and tax exemptions and can raise grants from Indian or foreign sources (with proper compliance).

Benefits of Section 8 Micro Finance Company

• 100% Tax Exemption under 12A & 80G of Income Tax Act
• Easy to Register, Operate & Scale in PAN India
• Acceptable for CSR and Foreign Funding with FCRA
• Builds strong trust with public & partners
• No Minimum Capital Requirement – Start with ₹1
• Eligible to receive Govt. Subsidies & Schemes

Who Can Register?

• NGO founders working in rural or tribal finance
• Women self-help groups (SHG) or cooperative leaders
• CSR departments of companies wanting to create legal lending units
• Individuals/teams aiming to promote financial literacy & inclusion
• Charitable trusts planning to expand into finance-based services

Registration Process

• Digital Signature Certificate (DSC) – for proposed directors
• Name Approval (RUN Form) – via MCA portal
• License from ROC (Form INC-12) – special license for Section 8
• Incorporation with SPICe+ – file MOA, AOA, DIR, AGILE forms
• Receive COI + Section 8 License – usually within 10-15 working days

Frequently Asked Questions

• Q: Can I start micro-lending without RBI approval?
  A: Yes, if you operate under Section 8 and do not collect public deposits.
• Q: Is this the same as NBFC-MFI?
  A: No, Section 8 is a non-profit legal body while NBFC-MFI is profit-oriented and RBI-regulated.
• Q: What are the tax benefits?
  A: You can apply for 12A and 80G to get full income tax exemption and allow donors to claim deductions.
• Q: Can I raise foreign funds?
  A: Yes, after FCRA registration from the Ministry of Home Affairs.
• Q: Is it suitable for cooperative lending models?
  A: Yes, it’s perfect for socially motivated, non-profit group lending models.