mukesh mrp
TRANSCRIPT
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Institute of Management Studies
DAVV, Indore
A
MAJOR RESEARCH PROJECT
ON
MICROFINANCING
Submitted in the partial fulfillment for the course requirement ofDegree of
M.B.A. (D.M)(2007-2009)
GUIDED BY
SUBMITTED BY
Mrs. NISHA SIDDHIQUI MANISH KUMAR
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IMS, DAVV MBA (DM) IVTH Sem
INSTITUTE OF MANAGEMENT STUDIES
D.A.V.V. INDORE
Certificate
To whom so ever it may concern
This is to certify that Mr Manish Kumar, the student of M.B.A.(DM) IV th
semester from Institute of Management Studies, Indore has completed hismajor research project titled Micro Financing under my guidance andsupervision.
This project is original work of the candidate for the award of any
degree/diploma.I am fully satisfied with the project work and recommend its acceptance inthe fulfillment o the award of the degree of master of businessadministration.
Date: Mrs.. Nisha SiddhiquiLecturer
IMS, DAVV, Indore.
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DECLARATION
I undersigned hereby declare that the project titled Micro Financing isbased on my authentic work.
The work done by others if referred has been properly acknowledged.
I also declare that this Major research project is report of my own individualeffort and has not been submitted to any other organization for the reward ofany certificate/diploma/degree.
Manish KumarIV Th Sem.
M.B.A. (DM)IMS, DAVV, Indore.
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ACKNOWLEDGEMENT
With immense pleasure, I would like to express my sincere thanks andgratitude to IMS,DAVV and all those individuals whose help, support and
assistance made the research project a reality.
I would like to express my deep sense of gratitude and sincere thanks toMrs. Nisha Siddhiqui, lecturer IMS, DAVV, Indore. for precious knowledge,
for giving her valuable time and efforts in guiding and encouraging me toprepare this Major research project.
I would like to express my deep sense of gratitude to my parents for helping
me in providing necessary information.
Submitted By:Manish Kumar
MBA (DM)IVTH Sem.
IMS, DAVV, Indore.
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CONTENTS
CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT
INTRODUCTION
REVIEW OF LITERATURE
RESEARCH OBJECTIVE
RESEARCH METHODOLOGY
QUESTIONNAIRE
DATA ANALYSIS AND INTERPRETATION
CONCLUSION AND SUGGESTIONS
BIBLIOGRAPHY
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INTRODUCTION
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As a majority of the Indian population lives in its 650,000-odd villages,there has been a consistent attempt by successive governments sinceIndependence to develop rural India. Despite these attempts, the sad truth isthat due to ineffectiveness in government or public delivery systems the
policy benefits hardly trickled down to the targeted beneficiaries.
As the nation works towards building a physical infrastructure, there is anurgent need to review the manner in which we are building our infrastructurein the rural areas, which hold around 715 million people.
The importance of specially building a robust financial infrastructure isapparent when about 290 million of these people survive on less than Rs.20
a day and more than half of them do not have any access to either banking orformal funding infrastructure.
It is the lack of access that creates opportunity for local moneylenders tothrive by charging exorbitant lending rates to their clientele. Majorities ofthem are rural poor and sometimes their inability to repay leads to eitherselling of their assets or taking of extreme steps like committing suicides.
The restricted access to capital and the high cost of servicing create a majorsocial problem; in the absence of inadequate rural enterprises vis--vis job
opportunities, the young generation has been migrating from rural to urbanareas for a better living.
Not only does this create an opportunity for exploitation of these young menand women, it also leads to an incredible pressure on the urban infrastructurein the cities and metros. Establishment of sustainable rural enterprises is nodoubt the best way to address this problem. In doing so, it is imperative tocreate requisite access to financial infrastructure at the grassroots.
Microfinance
refers to the provision of financial services topooror low-income clients,including consumers and the self-employed. The term also refers to the
practice ofsustainably delivering those services. Microcredit (or loans topoormicroenterprises) should not be confused with microfinance, whichaddresses a full range of banking needs for poor people.
http://en.wikipedia.org/wiki/Povertyhttp://en.wikipedia.org/wiki/Sustainablehttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microenterprisehttp://en.wikipedia.org/wiki/Povertyhttp://en.wikipedia.org/wiki/Sustainablehttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microenterprise -
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More broadly, it refers to a movement that envisions a world in which asmany poor and near-poor households as possible have permanent access toan appropriate range of high quality financial services, including not justcredit but also savings, insurance, and fund transfers. Those who promotemicrofinance generally believe that such access will help poor people out of
poverty.
"Indian microfinance is the supply of loans, savings, andother basic financial services to the poor."
As the financial services of microfinance usually involve small amounts ofmoney small loans, small savings etc. the term "microfinance" helps todifferentiate these services from those which formal banks provide.
Why are they small? Someone who doesn't have a lot of money isn't likelyto want to take out a $5,000 loan, or be able to open a savings account withan opening balance of $1,000. Hence "micro".
In the past few years, Indian microfinance has seen unprecedented growth.Despite the growth, there is considerable unmet demand for credit in India.According to a World Bank report, only 9% of poor families in India arecovered by microfinance. Of the projected credit requirement of $10909million, only $1050 million is met by microfinance. Although the demandfor credit is widespread, MFIs are not evenly distributed geographically
Micro Credit
Micro Credit is defined as provision of thrift, credit and other financialservices and products of very small amount to the poor in rural, semi-urbanand urban areas for enabling them to raise their income levels and improveliving standards. Micro Credit Institutions are those, which provide thesefacilities.
Interest rates applicable
The reform of the interest rate regime has constituted an integral part of thefinancial sector reforms initiated in our country in 1991. In consonance withthis reform process, interest rates applicable to loans given by banks tomicro credit organizations or by the micro credit organizations to Self-HelpGroups/member-beneficiaries has been left to their discretion. The interest
http://en.wikipedia.org/wiki/Social_movementhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Remittanceshttp://en.wikipedia.org/wiki/Social_movementhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Remittances -
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rate ceiling applicable to direct small loans given by banks to individualborrowers, however, continues to remain in force.
Terms & conditions for accessing micro credit
Banks have been given freedom to formulate their own lending normskeeping in view ground realities. They have been asked to deviseappropriate loan and savings products and the related terms and conditionsincluding size of the loan, unit cost, unit size, maturity period, grace period,margins, etc. Such credit covers not only consumption and production loansfor various farm and non-farm activities of the poor but also include theirother credit needs such as housing and shelter improvements.
Origin of Micro Finance:
The origin of micro finance is quite absorbing. Ipso facto, micro financecombines the strengths of both formal and informal systems of purveyingcredit. Availability of hassle free credit in a systematic manner is the uniquefeature of micro finance system.
Micro finance in informal system was in vogue in India in the form of chitfunds, etc., since time immemorial. It came into existence under formalsystem with the advent of co-operative movement in India in the beginningof the last century. The micro finance is primarily based on the principles of
co-operation namely, mutual help, democratic functioning, etc. Though, theco-operative movement was initially envisaged with unlimited liability andsmall size of societies consisting of homogenous groups, over the years inthe quest for improving the viability of co-operatives, large societies withlimited liabilities were organized. This apart, the evolution of State
partnership in co-operatives with entrenched bureaucracy, etc., distanced co-operative movement from the spirit of micro finance movement.
Nevertheless, micro finance movement in its present form is the valuable
contribution of Bangladesh to the world and Prof. Mohammed Yunus isconsidered the father of modern micro finance movement. Mostly the ruralpoor were caught in the clutches of money lenders as their access to creditfrom the banking system was constrained due to lack of collaterals and theirignorance. Hence, a beginning was made with a research project at Jabravillage by Prof. Mohammed Yunus of Chittagong University way back in1976 by giving small loans without collaterals to the poor who were
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organized into small groups. The idea worked well and demand for creditincreased manifold. The process was repeated and the institution promoted
by Yunus expanded its operations and came into existence as a specializedinstitution for financing the rural poor under Grameen Bank Ordinance ofthe Government of Bangladesh in 1983. The success of Grameen Bankmodel inspired its replication in one or the other form in many parts of theworld. Under Bangladesh model, borrowers or savers join together to formgroups consisting of five members to transact the business. The philosophyof voluntarism and one for all and all for one is the backbone of microfinance movement. The group also leads to mutual empowerment along withthe advantage of peer pressure on the behavior of group members.
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REVIEW OF LITERATURE
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A Brief History of Microfinance in India
The post-nationalization period in the banking sector, circa 1969, witnesseda substantial amount of resources being earmarked towards meeting thecredit needs of the poor. There were several objectives for the banknationalization strategy including expanding the outreach of financialservices to neglected sectors. As a result of this strategy, the bankingnetwork underwent an expansion phase without comparables in the world.Credit came to be recognized as a remedy for many of the ills of the poverty.
There spawned several pro-poor financial services, support by both the Stateand Central governments, which included credit packages and programscustomized to the perceived needs of the poor.
.The pioneering efforts at this were made by National Bank forAgriculture and Rural Development (NABARD), which was given the tasksof framing appropriate policy for rural credit, provision of technicalassistance backed liquidity support to banks, supervision of rural creditinstitutions and other development initiatives.In the early 1980s, the GoI launched the Integrated Rural DevelopmentProgram (IRDP), a large poverty alleviation credit program, which provided
government subsidized credit through banks to the poor. It was aimed thatthe poor would be able to use the inexpensive credit to finance themselvesover the poverty line. Also during this time, NABARD conducted a series ofresearch studies independently and in association with MYRADA, a leadingnon-governmental organization (NGO) from Southern India, which showedthat despite having a wide network of rural bank branches servicing therural poor, a very large number of the poorest of the poor continued toremain outside the fold of the formal banking system. These studies alsoshowed that the existing banking policies, systems and procedures, and
deposit and loan products were perhaps not well suited to meet the mostimmediate needs of the poor. It also appeared that what the poor reallyneeded was better access to these services and products, rather than cheapsubsidized credit.
Against this background, a need was felt for alternative policies,systems and procedures, savings and loan products, other complementaryservices, and new delivery mechanisms, which would fulfill the
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requirements of the poorest, especially of the women members of suchhouseholds. The emphasis therefore was on improving the access of the poorto microfinance rather than just micro-credit.
To answer the need for microfinance from the poor, the past 25 years hasseen a variety of microfinance programs promoted by the government and
NGOs. Some of these programs have failed and the learning experiencefrom them have been used to develop more effective ways of providingfinancial services. These programs vary from regional rural banks with asocial mandate to MFIs. In 1999, the GoI merged various credit programstogether, refined them and launched a new programme called SwaranjayantiGram Swarazagar Yojana (SGSY). The mandate of SGSY is to continue to
provide subsidized credit to the poor through the banking sector to generateself-employment through a self-help group approach and the program hasgrown to an enormous size.
Self-Help Groups: A Keystone of Microfinance in India - Women
empowerment & social security
MFIs have also become popular throughout India as one form of financialintermediary to the poor. MFIs exist in many forms including co-operatives,Grameen-like initiatives and private sector MFIs. Thrift co-operatives haveformed organically and have also been promoted by regional stateorganizations like the Cooperative Development Foundation (CDF) inAndhra Pradesh. The Grameen-like initiatives following a business modellike the Grameen Bank.Private sector MFIs include NGOs that act as financial services providers forthe poor and include other support services but are not technically a bank asthey do not take deposits. Recently, microfinance has garnered significantworldwide attention as being a successful tool in poverty reduction. In 2005,the GoI introduced significant measures in the annual budget affecting MFIs.Specifically, it mentioned that MFIs would be eligible for externalcommercial borrowings which would allow MFIs and private banks to do
business thereby increasing the capacity of MFIs. Also, the budget talked
about plans to introduce a microfinance act that would provide someregulations on the sector.Today, Self-Help Groups and MFIs are the two dominant form ofmicrofinance in India.This report focuses on the aspects of the SHG as an effective means to
provide financial services to the poor.
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Structure of SHG
A SHG is a group of about 10 to 20 people, usually women, from a similarclass and region, who come together to form savings and credit organization.They pooled financial resources to make small interest bearing loans to theirmembers. This process creates an ethic that focuses on savings first. Thesetting of terms and conditions and accounting of the loan are done in thegroup by designated members.
Is Foreign Investment allowed in Micro Credit ProjectsGovt. of Indiavide their notification dated August 29, 2000 have included Micro
Credit/Rural Credit in the list of permitted non-banking financial company(NBFC) activities for being considered for Foreign Direct Investment(FDI)/Overseas Corporate Bodies (OCB)/Non-Resident Indians (NRI)investment to encourage foreign participation in micro credit projects. Thiscovers credit facility at micro level for providing finance to small producersand small micro enterprises in rural and urban areas.
What role does a Non-Governmental Organization (NGO) play in provision of
Micro Credit
A Non-Governmental Organization (NGO) is a voluntary organization established toundertake social intermediation like organizing SHGs of micro entrepreneurs andentrusting them to banks for credit linkage or financial intermediation like borrowing
bulk funds from banks for on-lending to SHGs.
How many types of micro credit providers are there in India and what is the
present legal framework governing them?
The position is as:
Categories of Providers Legal Framework governing their activities
(a) Domestic CommercialBanks:Public Sector Banks;Private Sector Banks &
(i) RBI Act 1934/(ii) BR Act 1949(iii) SBI Act(iv) SBI Subsidiaries Act
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Local Area Banks (v)Acquisition & Transfer of Undertakings Act 1970& 1980
(b) Regional Rural Banks i. RRB Act 1976ii. RBI Act 1934
iii. BR Act 1949
(c) Co-operative Banks i. Co-operative Societies Actii. BR Act 1949 (AACS)
iii. RBI Act 1934 (for sch. banks)
(d) Co-operative Societies (i) State legislation like MACS
(e) Registered NBFCs (i) RBI Act 1934(ii) Companies Act 1956
(f) Unregistered NBFCs (i) NBFCs carrying on the business of a FI prior tothe coming into force of RBI Amendment Act 1997whose application for CoR has not yet been rejected
by the Bank(ii) Sec. 25 of Companies Act
(g) Other providers likeSocieties, Trusts, etc.
(i) Societies Registration Act 60(ii) Indian Trusts Act
(iii) Chapter IIIC of RBI Act 34(iv) State Moneylenders Act
Microfinance and Demand for
Microfinance Services
Microfinance is about provision of thrift, credit and other financial services
and products of very small amounts to the poor in rural, semi-urban or urban
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areas for enabling them to raise their income levels and to improve their
living standards (NABARD 1999). In fact, it is tempting to state that there
is nothing new about microfinance in India. Banks in India have been giving
small loans and have been accepting small deposits. It is reported that about
55% of all loans given by all scheduled commercial banks in India are small
loans i.e. less than Rs.25, 000 as on March 2004 (Economic and Political
Weekly, March 18-24, 2006, p.1131). However, the number of small
borrowal accounts has experienced an absolute decline in recent years. But
this is not microfinance as understood in the present context in its true spirit.
In today's context, microfinance has certain design principles as described
below.
The design principles of microfinance are derived from the needs and socio-
economic conditions of the poor and have emerged from the experience of
microfinance institutions during the last two to three decades all over the
world. These design principles are: small saving or thrift by poor is possible
if collected at doorsteps; poor people need small collateral free loans with
frequency instead of large loans at a time; non-rigidity of end use is
preferred by poor people over rigid end use of small loans; repayment to
match with existing family cash flow instead of individual cash flow or
project cash flow; rate of interest is not crucial relative to hassle free, timely,
adequate and continued credit facility; relatively small repayment periods
are preferred, e.g. weekly, fortnightly, monthly, instead of half-yearly,
yearly, etc.; intensive supervision is required for microfinance operations;
credit plus is preferred over credit alone; women are better customers
relative to men; and group method of lending is more successful relative to
individual lending.
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Studies report that poor rural households require about Rs.6,000/- per annum
and a poor urban household requires on an average about Rs.9,000/- per
annum (Mahajan et al, 1999). The total credit requirement of rural and urban
poor households in India works out to be about Rs.49,500 crores. The
estimates, however, have ranged from Rs 30,000 Crore to Rs 200,000 Crore
(Economic Times, New Delhi Edition, 29 August, 2005) and shows the
magnitude of business that is involved if all poor households are to be
reached by formal financial institutions. The current supply figures
pertaining to SHG-Bank linkage programme are in the range of Rs 180
billion as on March 2007 (NABARD Website).
It is reported that the outreach of formal financial institutions is about 17.2%
of rural households in terms of loan accounts (RBI, 2005). Obviously, in
terms of individuals it would be much less. However, in terms of saving
accounts, this proportion is about 18.4%. It is important to remember that
these proportions relate to all rural households and are much less for poor
rural households. The point that is notable is that there is huge demand for
financial services from poor that has to be met by formal financial
institutions or other institutions providing microfinance. The same applies,
with added urgency, regarding insurance services for poor which are more
scarce to come by.
Role of Formal Financial Institutions
Experience of formal financial institutions i.e. commercial banks,
cooperative banks and RRBs in dealing with poor has not been generally
good. Bankers have complained that transaction cost in lending to poor is
high. Delinquency and default rates are reported to be high. Regulation of
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interest rates by Reserve Bank of India (RBI) has further added to the
difficulties of formal financial institutions. Though since 1994, all
Cooperative Banks are free to charge rate of interest according to their costs.
Since 1996, all Regional Rural Banks (RRBs) have been allowed to charge
rate of interest according to their costs. Only Commercial Banks are advised
by RBI to link their interest rates with their prime lending rate (PLR) for
their loan amounts less than Rs.2 lakh. Other reasons cited by bankers for
not lending to poor in rural areas are lack of collateral security, rural areas
not being safe, staff not being rural oriented, etc.
Poor people also experience problems in dealing with banks. They report
that credit from bank is not easily available. Poor people also find the
transaction cost of borrowing from banks very high. This cost is over and
above the interest that is charged. It includes out of pocket expenses that are
incurred in paying travel cost, middleman, and price difference in assets and
opportunity cost of their time. Transaction cost for availing saving facilities
is also high. This is mainly due to distance and the amount of saving being
small. Further, there is a mismatch in loan amounts and terms and conditions
of the loan. Because of these reasons, there is a mismatch between what
banks can provide and what poor people really need.
Self Help Groups and their Linkage with Banks
One of the successful ways through which microfinance services are beingprovided to poor people is through Self-Help Groups. It all started with
experiments of some non-government organizations (NGOs) working in
south India during early 80s and has now come to be known as Self-Help
Group approach to microfinance. With intervention of RBI, National Bank
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for Agriculture and Rural Development (NABARD), Small Industries
Development Bank of India (SIDBI), Rashtriya Mahila Kosh (RMK) and
other organisations, Self Help Group bank linkage has become a
supplementary channel for providing financial services from formal
financial institutions to poor people. Under this linkage arrangement, SHGs
are assessed by bank for bank credit after about 6 months of their
functioning. If SHGs are found functioning well, then, bank credit is
sanctioned up to four times the savings of the SHG.
The various types of possible groups are: (i) Savings and Credit Groups, (ii)
Social Forestry Groups, (iii) Water Users' Groups, (iv) Watershed
Development Groups, (v) Farmers' Interest Groups, etc.
Current Scene of SHG-Bank Linkage
Microfinance through SHGs has reached a commendable position and it is
currently acknowledged as the biggest microfinance intervention in the
world. The progress of the SHG-bank linkage programme since inception is
shown below. The programme took off with a humble beginning of linking
255 groups in the first year i.e. 1992-93 with a loan disbursement of Rs 2.9
million only. Average loan per SHG was about Rs 11.37 thousand in 1992-
93 whereas it has grown to Rs 61.68 thousand in the year 2006-07. There
has been a tremendous growth in the number of groups over time. More than
29.2 million SHGs with a membership of 40.95 million households are
linked to bank credit till March 2007 as shown below.
No. of SHGs linked to Banks in India (1992-93 to 2006-2007)
Year Cumulative No. of
SHGs
Bank loan (Rs.
Million)
1992-93 255 2.9
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1993-94 620 6.5
1994-95 2122 24.5
1995-96 4757 60.6
1996-97 8598 118.4
1997-98 14317 237.61998-99 32995 570.7
1999-2000 114775 1929.8
2000-01 263825 4809.0
2001-02 461478 10263.0
2002-03 717360 20487.0
2003-04 1079091 39042.0
2004-05 1628476 68984.6
2005-06 2238565 113980.0
2006-07 2924973 180410.0Source: Various Reports of MCID, NABARD; NABARD (2004) and
NABARD website.
The Table above shows that there has been a rapid growth of SHGs that are
linked with banks i.e. Commercial banks, Regional Rural Banks and
Cooperative banks for meeting credit requirements and other financial needs
of SHG members in recent years. Particularly after 2000 the number ofSHGs linked to banks has grown exponentially.
In addition, there is other experience e.g. the Grameen Bank of Bangladesh
model is being replicated in various parts of India. SIDBI is also promoting
microfinance through NGOs who are in the business of microfinance.
Rashtriya Mahila Kosh (RMK) is also in the business of promoting
microfinance in India through NGOs. It is estimated that the total outreach
of Microfinance Institutions is about 7.5 million (Sa-Dhan website). If 40
million of SHG-bank linkage are added to this, the total outreach of
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microfiance in India would become truly significant keeping in mind that
there are about 60 million poor households in India.
Impact of SHG-Bank Linkage Programme
Microfinancing i.e. provisioning of small financial services and products to
poor people is contributing to the process of development by creating
conditions that are conducive to human development. It has a strong gender
orientation. About 90% SHGs that are linked to banks are reported to be of
women as mentioned earlier. Through these groups, women empowerment
is taking place. Their participation in economic activities and decision
making at household and at society level is increasing. It is making the
process of development participatory, democratic, independent of subsidy
and sustainable. Therefore, microfinance through SHGs is contributing to
poverty reduction in a sustainable manner.
Studies have shown overall positive impact of SHG bank linkage
programme on the socio-economic conditions of rural poor (Puhazhendi and
Badatya, 2002; MYRADA, 2002). It is reported that significant changes in
the living standards of SHG members have taken place in terms of increase
in income level, assets, savings, borrowing capacity and income generating
activities. There are signs of empowerment taking place among women
members of SHGs.
Emerging Challenges
The concept and results of microfinancing through SHGs thus far are so
impressive that it is attracting a lot of attention from all corners. There is a
real danger that it may be hijacked by unwanted but otherwise influential
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agencies including government programmes. Also, a lot needs to be done
for sustaining and upscaling the SHG movement. Some challenges that need
to be addressed before microfinance through SHGs can significantly
contribute to participatory rural development are outlined below:
(i) The number of SHGs linked to Banks has reached commendable height.
However, many of these groups are not functioning properly. These
groups need to be looked after. Normally, groups are promoted under
certain programme or project. Once the programme or project is over, the
agency withdraws and the groups are left on their own. Such groups need
support for sustaining their efforts. This support is crucial and can prove
to be vital for the long-term success of SHG-bank linkage programme.
(ii)The participatory process of SHG formation is people-based and
promotes self-help among the poor. The formation and maturity of SHGs
depends on evolving group dynamics and can take up to one to three
years. Therefore, hastening the process of SHG formation by setting
unrealistic targets could do more harm than good.
Strengths of Indian Micro Finance Sector:
India is the largest democracy in the world. Unity in diversity is the greateststrength of India. Despite vast differences in terms of language, caste,religion, etc., driven by the co-operative spirit, people are interwoven withcommon affiliations and social obligations. The factors like personal rapportand proximity and like-mindedness have added to the spread of the
programme.
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Broad-based Definition
In India definition of Micro-finance is unique in the sense that it has thepotential to offer an array of credit and savings products as well as otherfinance services, which are required by the poor. Micro-finance in India isdefined as Provision of thrift credit and other financial services and
products of very small amount mainly to the poor in rural and urban areasfor enabling them to reach their income level and thereby improving thestandard of living". As a result of this broad-based definition, micro-financeinstitutions are in a better leverage to help the poor.
Micro Finance Development Fund
There is an urgent need for micro credit providers to shift from a minimalist
approach that is offering only financial intermediation to an integratedapproach to poverty alleviation taking a more holistic view of the clientincluding provision of enterprise development services like marketinginfrastructure, introduction of technology and design development. In thiscontext, the setting up of the Micro Finance Development Fund marks animportant step. Pursuant to the announcement of Union Finance Minister inhis budget speech for the year 2000-01, this Rs. 100 crore Fund has beencreated in NABARD to support broadly the following activities: (a) givingtraining and exposure to self-help group (SHG) members, partner NGOs,
banks and govt. agencies; (b) providing start-up funds to micro finance
institutions and meeting their initial operational deficits; (c) meeting the costof formation and nurturing of SHGs; (d) designing new deliverymechanisms; and (e) promoting research, action research, managementinformation systems and dissemination of best practices in micro finance.This Fund is thus expected to address institutional and delivery issues likeinstitutional growth and transformation, governance, accessing new sourcesof funding, building institutional capacity and increasing volumes. RBI and
NABARD have contributed Rs. 40 crore each to this Fund. The balance Rs.20 crore were contributed by 11 public sector banks.
Micro Finance Development Fund (MFDF) in NABARD with a start upcontribution of US $ 8.76 million from RBI and US $ 8.76 million from
NABARD was set up in 2000-01. Further, US $ 4.38 million wascontributed to the fund by 11 commercial banks. As at end-March 2002, theFund aggregated to US $ 21.33 million. Under this fund, NABARD, banksand other institutions to provide start up funds to micro finance institutions
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and infrastructural support for training system, arrangement and databuilding under micro finance
Greater Freedom to the Micro Finance Institutions:
i) RBI has allowed banks to formulate their own models or choose anyconduit/ intermediary for extending micro credit. Banks are allowed tochoose suitable branch/pocket/ area where micro credit programmes can beimplemented.
ii) Banks are permitted to prescribe their own lending norms keeping in viewthe ground realities.
iii) Banks are also allowed to devise appropriate loan and saving productsand related terms and conditions including the size of loan, unit cost, unitsize, maturity period, grace period, margins and purpose of borrowingincluding for housing and shelter needs.
iv) Interest rates on bank's loans given to micro finance institutions arecompletely deregulated.
v) Bank lending under micro finance is treated as part of priority sector
targets as well as under sub-target of lending to the weaker sections.
vi) The micro finance institutions registered as not for profit NBFCs have been exempted from registration and prudential requirements. RBI haspermitted such NBFCs to provide credit not exceeding US $ 0.001 millionfor business activity and US $ 0.003 million for meeting the cost of adwelling unit to the poor.
vii) Unsecured advances given by banks to SHGs against group guaranteesbe excluded for the purpose of computation of the prudential norms on
unsecured guarantees and advances until further notice.
This apart, the Government of India has also allowed foreign directinvestment in micro credit to encourage foreign participation in variousmicro finance projects
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Computerisation of Micro finance Operations
Generally, the facilitator tracks member accounts at the village level withhand written sheets and passbooks. A good measure of time is devoted tomanually updating the records and little time is spent on interface anddiscussions on economic and social aspects. Elsewhere in southern part ofthe country, a micro credit institution known as Swayam Krishi Sangam(SKS) has introduced Smart Card into its micro credit programme. Thefacilitators carry a Hand Held Computer (HHC) to the meeting. The HHCdownloads information from the branch computer in the village. Eachmember has a smart card, which electronically holds member's informationand records of transactions. During the meeting, each member inserts her orhis smart card in the HHC and transactions are updated both in the smartcard and the HHC. At the end of each day, facilitator uploads the
information from HHC to branch computer and all accounts are updated. Arecord along with HHC is kept in the village so that members can confirmtheir accounts. In this manner smart cards eliminates the need for manualrecord keeping, which greatly enhances time for interface.
Similarly, another micro finance institution popularly known as calledSEWA Bank has adopted a specially designed software, which maintainsarea-wise and occupation-wise information on overdue accounts. Thissoftware has been given to field workers, which has greatly facilitated thetransaction of business. Computerization has now also made available the
services of a substantial part of the workforce, hitherto deployed inoperational work-areas for collection purposes.
. Up scaling the Outreach to the Urban Poor
The emphasis of micro finance programmes in most of the countries hasbeen on rural areas. However, there has been a growing migration of ruralpoor in search of employment to urban areas. As a consequence, the numberof poor in urban areas has multiplied. The access of urban poor to the formal
banking sector is equally constrained due to lack of collaterals. Hence, thereis a need to expand the outreach of micro finance to cover the urban poor.Recognizing such an imperative, some of the micro finance institutions suchas SEWA Bank and SRFS (Sungamitra Rural Financial Services) and also anumber of NGOs have started organizing the poor into SHGs and operatingon the principles of micro finance in urban areas.
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In the development paradigm, micro-finance has evolved as a need-basedpolicy and programme to cater to the so far neglected target groups (women,poor, rural, deprived, etc.). Its evolution is based on the concern of alldeveloping countries for empowerment of the poor and the alleviation of
poverty. Development organizations and policy makers have included accessto credit for poor people as a major aspect of many poverty alleviation
programmes.
Micro-finance programmes have, in the recent past, become one of the morepromising ways to use scarce development funds to achieve the objectives ofpoverty alleviation. Furthermore, certain micro-finance programmes havegained prominence in the development field and beyond. The basic idea ofmicro-finance is simple: if poor people are provided access to financialservices, including credit, they may very well be able to start or expand amicro-enterprise that will allow them to break out of poverty.
Thus, micro-finance has become one of the most effective interventions foreconomic empowerment of the poor.
Understanding the Development Process through Micro-finance
Micro finance is expected to play a significant role in poverty alleviation anddevelopment. The need, therefore, is to share experiences and materials,which will help not only in understanding successes and in failures but also
provide knowledge and guidelines to strengthen and expand micro financeprogrammes.
In India, varieties of micro-finance schemes exist and various approaches
have been practiced by both GOs and NGOs. Ultimately, the aim is toempower the poor and mainstream them into development. Amongstdifferent approaches of micro-finance schemes, the process and stagesremain more or less the same.
The development process through a typical micro-finance intervention canbe understood with the help of Chart - 2. The ultimate aim is to attain social
MICRO FINANCE INTERVENTIONS
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and economic empowerment. Successful intervention is therefore, dependenton how each of these stages has been carefully dealt with and also thecapabilities of the implementing organizations in achieving the final goal,e.g., if credit delivery takes place without consolidation of SHGs, it mayhave problems of self-sustainability and recovery. A number of schemesunder banks, central and state governments offer direct credit to potentialindividuals without forcing them to join SHGs. Compilation andclassification of the communication materials in the directory is done basedon this development process.
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Classifying Micro-Finance Interventions
There are several Micro-Finance implementing organizations, which providesmall loans in India. Some of them have successfully expanded theirservices to thousands of borrowers. Given the fact that most of these
borrowers would not have had access to formal financial institutions, thatmany of the borrowers utilize the loans to enter and/or expand their informal
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sector micro enterprises, and that the informal sector continues to be animportant source of livelihood for many poor people, these Micro FinanceOrganizations (MFOs) may very well have had a major impact on improvingthe living standards of millions of poor persons as well as on promotingeconomic growth. The term MFO has been used for all types ofimplementing organizations facilitating savings and credit and financialactivities at individual and/or group level, not going into details of legal andtechnical aspects of MFOs.
Some of these organizations have evolved from small NGOs to becomeimportant providers of financial services. Realizing the potentially importantrole that MFOs play in deepening the benefits of economic growth,
In India, there exists a variety of micro finance organizations in government
as well as non-government sectors. Leading national financial institutionslike the Small Industries Development Bank of India (SIDBI), the NationalBank for Agriculture and Rural Development (NABARD) and the RashtriyaMahila Kosh (RMK) have played a significant role in making micro credit areal movement. In India, the size and types of implementing organizationsrange from very small to moderately big organizations involved in savingsand or credit activities for individuals and groups. These groups also adopt avariety of approaches. However, most of these organizations tend to operatewithin a limited geographical range. A few exceptions like PRADAN,ICECD, MYRADA, and SEWA have been successful in replicating their
experiences in other parts of the country and act as Resource Organisations.In addition, many organizations are involved with SHGs, not only for credit,
but also for other purposes like watershed, agriculture, etc.
Micro-finance interventions can be identified based on their span of activity,source of funds, route through which it reaches the poor or the coverage.However, it seems that one of the most common practices and approaches
prevalent is providing credit through Self-Help Groups. The approach is tomake SHGs the main focal point to route all credit to members. Almost all
national funding organizations (NABARD, RMK) as well as otherGovernment schemes advocate forming of Self-Help Groups and thusproviding or linking with credit. However, many organizations providingindividual finance directly also exist. It has been explained in Chart - 3.
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The Participating Organisations
The preparation of this resource directory covered about 450 organizationsinvolved in micro-finance activities in 11 states of India. Theseorganizations are classified in the following categories to indicate thefunctional aspects covered by them within the micro finance framework. The
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aim, however, is not to "typecast" an organization, as these have many otheractivities within their scope:
1. Organisations implementing micro-finance activities
2. Resource organizations or support agencies
3. Formal financial institutions - Banks and development organizations, likeNABARD, SIDBI, Association of MFOs etc.
Organizations Implementing Micro Finance Activities
Organisations implementing micro-finance activities can be categorized intothree basic groups.
I) Organisations which directly lend to specific target groups and arecarrying out all related activities like recovery, monitoring, follow-up etc.Some of these organizations are graduating to become exclusive MFOs, butsuch cases are few.
II) Organisations who only promote and provide linkages to SHGs and arenot directly involved in micro lending operations.
III) Organisations, which are dealing with SHGs and plan to start micro-finance related activities.
Resource Organizations or Support Agencies
These organizations provide support to implementing organizations. Thesupport may be in terms of resources or training for capacity building,counseling, networking, etc. They operate at state/regional or national level.They may or may not be directly involved in micro-finance activities.
A few associations to bring such MFOs on one platform have also been
initiated in India. Experiences sharing through newsletters and/or meetings/seminars/training are the methods adopted by the associations/collectives tosupport implementing organizations.
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Formal Financial Institutions - Banks
Commercial Banks, Gramin Banks and Rural Banks provide funds to SHGsand also operate their accounts. Funding agencies and developmentinstitutions channelise credit through these FIs. Building gender sensitivityand developmental dimensions amongst these agencies is a major need.Banks prefer to route credit through SHGs, though they directly lend toindividuals also.
Development Agencies/Nodal Agencies in India, development agencies likeNABARD, SIDBI and RMK provide funds for credit. They support MFOsand have separate allocations for SHGs and micro-credit. Theseorganizations have developed guidelines and training materials to helpMFOs implement micro-credit activities covered under their preview.
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RESEARCH OBJECTIVE
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RESEARCH OBJECTIVE
The main objectives of the research are as under:
To study how micro financing is helpful for poor households,helping them raise income, build up assets and/or cushion themagainst external shocks.
To analyze the nature of population going for micro finance.
To analyze the quality of services provided by micro financ and to knowsatisfaction of customer
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RESEARCH METHODOLOGY
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RESEARCH METHODOLOGY
Research Methodology talks about the data collection of the projectwork.The research design method, to be in the study, is of primary in natureand includes the following:
Research done for collecting various details about subject matterusing internet and other past researches.
Questionnaire is designed on the basis of learning and is used tocollect data from respondents.This method is used in order to makererference to phenomenon as they exist in the real life and it isreally economical in terms of time and resources.
The data so collected through these tools are analysed on statisticsusing frequency prcentage and chi square method to arrive at the
results.
SUBJECT
Subject for the study were 30 people of Petlavad. These subjectswere drawn randomly .24 men and 6 women were taken for research. This isdone in anticipation that such a sampling of subject will provide thenecessary variety of information required for the study.
RESEARCH INSTRUMENT
The instrument used in the study is a self designed questionnaire.The questionnaire comprised of two parts or sections:
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Section A consists of 12 questions seeking data reated to generaldemographic and awareness.Section B consists of 11 close ended questions based on the response (likert)scale giving idea about the satisfaction level of respondents towards thegovt. policies and shemes regardinf micro finance ,etc.
PROCEDURE
I visited petlavad and have a talk to the people taking microfinance,interestcharged to them and their view regarding all the policies and subsidyapproved by the goverenment for tribal poppulation and also have a talkwith the staff of the dhar jhabua grameen bank. After collecting theseinformations I filled the questionnaire.
Petlawad is a town and a nagar panchayat in Jhabua district in the Indianstate ofMadhya Pradesh. Major town in region are Raipuria, Sarangi,Bamnia and Karwad.As of 2001 India census[2] , Petlawad had a population of 12,419. Malesconstitute 51% of the population and females 49%. Petlawad has an averageliteracy rate of 71%, higher than the national average of 59.5%: maleliteracy is 79%, and female literacy is 62%. In Petlawad, 15% of the
population is under 6 years of age.
http://en.wikipedia.org/wiki/Nagar_panchayathttp://en.wikipedia.org/wiki/Jhabua_districthttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/States_and_territories_of_Indiahttp://en.wikipedia.org/wiki/Madhya_Pradeshhttp://en.wikipedia.org/wiki/Censushttp://en.wikipedia.org/wiki/Censushttp://en.wikipedia.org/wiki/Petlawad#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Petlawad#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Nagar_panchayathttp://en.wikipedia.org/wiki/Jhabua_districthttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/States_and_territories_of_Indiahttp://en.wikipedia.org/wiki/Madhya_Pradeshhttp://en.wikipedia.org/wiki/Censushttp://en.wikipedia.org/wiki/Petlawad#cite_note-1%23cite_note-1 -
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QUESTIONNAIRE
RESPONSE PRESENTATION
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age
Percent
Valid 18-28 10.028-38 36.738-48 26.748 & above 26.7Total 100.0
INTERPRETATION: The above table and bar chart indicate thatout of total respondents taking microfinance, 3 6.7% fall in the age group of28-38,26.7% in the age group of38-48 and 48 and above and 10% I the agegroup of 18-28. It indicate that micro finance is generally taken by the
people of more than 28 of age.
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gender
Gender Valid Percent
Male 80.0Female 20.0
Total 100.0
INTERPRETATION: The above table and bar chart indicate that out oftotal respondents 80% are males and 20% are females.
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education
Percent
Valid below10th 40.010th-12th 33.3Graduate 16.7Postgraduate 10.0Total 100.0
INTERPRETATION: The above table and bar chart indicate that out oftotal respondents 40% of the people are educated below 10th , 33.7% haveeducation between 10th-12th,16.7% are graduate while only 10% are postgraduate. It indicate that most of the people have education below 10th.
Occupation
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Occupation Valid Percent
Valid business 26.7shopkeeper 20.0farmer 43.3others 10.0Total 100.0
INTERPRETATION: The above table and bar chart indicate that
out of total respondents taking microfinance, 43.3% are farmers,26.7% havethe business or starting the business,20% are shopfeepers and other 10%have other occupations. It indicate that micro finance is generally taken bythe farmers in the petlavad.farmer
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PercentValid
PercentCumulative
Percent
Valid own land 33.3 71.4 71.4rented land 13.3 28.6 100.0
Total 46.7 100.0Missing System 53.3Total 100.0
INTERPRETATION: The above table and bar chart indicate that out oftotal respondents who are farmers,71.4% have their own landwhile21.6%have rented land in the petlavad.
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income
Frequency Percent Valid PercentCumulative
Percent
Valid below3000 8 26.7 26.7 26.73000-6000 8 26.7 26.7 53.36000-9000 10 33.3 33.3 86.7above9000 4 13.3 13.3 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that out oftotal respondents 33.3% have income between 6000-9000 p.m.,26.7% haveincome below 3000, other 26.7% have income between 3000-6000 and 13%are above 9000.
Time period
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Frequen
cy PercentValid
PercentCumulative Percent
Vali
d
0-36 months 26 86.7 86.7 86.7
more than 36months 4 13.3 13.3 100.0
Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that86.7% ofrespondents have taken loan for up to 36 months or up to 3 years while13.3%have taken loan for more than 3 years. Generally, people take loanfrom 1to5 years.
The loan has benefited me.
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Frequenc
y PercentValid
PercentCumulative
Percent
Vali
d
N 10 33.3 33.3 33.3
A 17 56.7 56.7 90.0SA 3 10.0 10.0 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that out oftotal respondents taking microfinance, 56.7% says that loan has benefitedthem.i.e. they are agree, 33.3%are neutral and 10% are strongly agree. Itindicates that micro finance has benefited most of the people in the petlavad.
The loan helped me in fulfilling my purpose.
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Frequency PercentValid
PercentCumulative
Percent
Valid DA 2 6.7 6.7 6.7N 8 26.7 26.7 33.3
A 15 50.0 50.0 83.3SA 5 16.7 16.7 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate thatout of total respondents taking microfinance, 50% are agreed that microfinance helped them in fulfilling their purpose., 26.7% are neutral,16.7%said that they are strongly agree while according to 6.7%throughmicrofinance they couldnt fulfill their purpose.The loan is easily provided.
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Frequency PercentValid
PercentCumulative
Percent
Valid SDA 1 3.3 3.3 3.3DA 2 6.7 6.7 10.0
N 10 33.3 33.3 43.3A 17 56.7 56.7 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate thatout of total respondents 56.7% are saying that micro finance is easilyprovided,33.3% are neutral,6.6% are disagree and 3.3% are stronglydisagree with the statement.
The loan sanctioning process is not complicated.
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Frequenc
y PercentValid
PercentCumulative
Percent
Valid DA 9 30.0 30.0 30.0
N 10 33.3 33.3 63.3A 11 36.7 36.7 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that
36.7% are saying that the loan sanctioning process is not complicated while30% are disagreeing. And 33.3% are neutral.
The formalities for procuring loan are easy.
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Fr
equency Percent Valid PercentCumulative
Percent
Valid SDA 3 10.0 10.0 10.0DA 6 20.0 20.0 30.0
N 9 30.0 30.0 60.0A 11 36.7 36.7 96.7SA 1 3.3 3.3 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart is showing
that 36% of the people are agree with the statement The formalities forprocuring loan are easy30% are neutral,20% are disagree , 10% are stronglydisagree and 3.3% are strongly agree. It indicates that moistly the people arein favor.
Number of documents need is not much.
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Frequency PercentValid
PercentCumulative
Percent
Valid SDA 3 10.0 10.0 10.0DA 6 20.0 20.0 30.0
N 10 33.3 33.3 63.3A 7 23.3 23.3 86.7SA 4 13.3 13.3 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart is showing
that 23.3% of the people are agree with the statement Number of documents need is not much.13.3% are strongly agree,33.3%are neutral while 20% are disagree and 10% are strongly disagree.
The govt. policies schemes made for providing subsidy is satisfactory.
Frequency Percent Valid Percent Cumulative
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Percent
Valid SDA 4 13.3 13.3 13.3DA 10 33.3 33.3 46.7
N 9 30.0 30.0 76.7
A 6 20.0 20.0 96.7SA 1 3.3 3.3 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate thatout of total respondents taking microfinance, 33.3% are disagree and 13.3%
are strongly disagree with the govt. policies . And 30% are neutral while20% are agree and other 3.3% are strongly agree. It indicates that most ofthe people are disagree with the govt. policies regarding subsidy in the
petlavad.
The subsidy provided by the government is sufficient.
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Frequency Percent Valid PercentCumulative
Percent
Valid DA 4 13.3 13.3 13.3N 14 46.7 46.7 60.0
A 10 33.3 33.3 93.3SA 2 6.7 6.7 100.0Total 30 100.0 100.0
INTERPRETATION: From the above table and bar chart it indicate that46.7% are neutral, 33.3% of the people are satisfied with the services
provided by institutions, while 13.3% are disagree and 6.7% are agree.
The interest charge is reasonable.
Frequency Percent Valid Percent Cumulative
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Percent
Valid SDA 4 13.3 13.3 13.3DA 4 13.3 13.3 26.7
N 11 36.7 36.7 63.3
A 11 36.7 36.7 100.0Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that
36.7% people are neutral; other 36.7% are agree, while 13.3 % of the peopleare, disagree and strongly disagree respectively. Mostly people are in thefavor of interest charged in the petlavad.
Loan amount
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Frequenc
y PercentValid
PercentCumulative
Percent
Valid 0-50000 20 66.7 66.7 66.750000-100000 4 13.3 13.3 80.0
100000-300000 6 20.0 20.0 100.0
Total 30 100.0 100.0
INTERPRETATION: The above table and bar chart indicate that
in the petlavad, people generally take loan between0 to 50,000 Rs.which is showing 66.7% in the table while 20% of therespondents have taken the loan amounted between Rs.1,00,000 to 3,00,000and 13.3% have taken loan between Rs. 50,000 to 1,00,000.
intrate
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Frequency PercentValid
PercentCumulative
Percent
Valid 7% 21 70.0 70.0 70.012% 9 30.0 30.0 100.0
Total 30 100.0 100.0
INTERPRETATION: The respondent who are taken in the sampleare charged the interest with 7% and 12% respectively.
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DATA ANALYSIS&
INTERPRETATION
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Gender * education Cross tabulation
Count
Education Totalbelow10th
10th-12th
graduate
postgraduate
below10th
gender
male 9 8 4 3 24Female
3 2 1 0 6
Total 12 10 5 3 30
INTERPRETATION: The table shows that most of the people takingmicro finance are educated below 10th are males.
Gender * income Cross tabulation
Count
Income Total
below3000
3000-6000
6000-9000
above9000
below3000
gender
male 5 5 10 4 24Female
3 3 0 0 6
Total 8 8 10 4 30
INTERPRETATION: The above table clearly shows that most of thepeople taking micro finance are having income between 6000 to 9000 aremales.
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Education * occupation Cross tabulation
Count
Occupation Totalbusiness
shopkeeper Farmer others
business
education
below10th
3 2 7 0 12
10th-12th 3 2 4 1 10graduate 2 1 2 0 5
postgraduate
0 1 0 2 3
Total 8 6 13 3 30
INTERPRETATION: The above table clearly shows that amongst theoccupation the farmers are less educated than that of others.
Interest rate & int. rate reasonable Cross tabulation
Test Statistics11& interest rate Cross tabulat
Count
Intrate Total
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7% 12% 7%
intreasonab SDA 2 2 4DA 3 1 4
N 9 2 11
A 7 4 11Total 21 9 30
Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-Square 1.753(a) 3 .625
INTERPRETATION: The above table shows that as the chi square thesignificance value is 0.625, which is insignificant. It shows that interest rate
and the satisfaction level of the people saying interest charge is reasonableare correlated.Cross tab: Occupation and loan benefit
Count
Loanbenef Total
N A SA N
Occupatio business 2 5 1 8
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n shopkeeper 2 4 0 6farmer 5 6 2 13others 1 2 0 3
Total 10 17 3 30
Chi-Square Tests
Value Df Asymp. Sig. (2-
sided)
Pearson Chi-Square 2.057(a) 6 .914
INTERPRETATION: As the chi square, the significance value is 0.914,which is insignificant. So it indicates that businesspersons, shopkeepers,farmers and others taking microfinance do not differ in the benefit they are
getting.Occupation * & 8th point Cross tabulation
Count
Subsidysuffi Total
SDA DA N A SA SDA
occupati business 3 1 2 2 0 8
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on shopkeeper
4 1 1 0 0 6
farmer 3 4 2 3 1 13others 0 0 2 1 0 3
Total 10 6 7 6 1 30
Chi-Square Tests
Value Df Asymp. Sig. (2-
sided)
Pearson Chi-Square 10.890 12 .538
INTERPRETATION: As the chi square, the significance value is 0.538,which is insignificant. So it indicates that occupation does not have direct
bearing on the opinion that subsidy provided by the government is sufficient.
Occupation * fulfilpurpose Cross tabulationCount
fulfilpurpose Total
DA N A SA DA
Occupation
business 1 1 5 1 8shopkeeper
1 2 2 1 6
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farmer 0 3 7 3 13others 0 2 1 0 3
Total 2 8 15 5 30
Chi-Square Tests
Value df
Asymp.Sig. (2-sided)
Pearson Chi-Square
6.632(a)
9 .675
INTERPRETATION: The above table shows that as the chi square thesignificance value is 0.67, which is insignificant. It shows that theoccupation does not have the direct bearing on fulfilling of purpose.Occupation * polsatisfac Cross tabulation
Count
Polsatisfac Total
SDA DA N A SA SDA
occupation
business 1 2 2 3 0 8shopkeeper
2 2 2 0 0 6
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farmer 1 4 5 3 0 13others 0 2 0 0 1 3
Total 4 10 9 6 1 30
Chi-Square Tests
Value df Asymp. Sig.(2-sided)
Pearson Chi-Square 17.092(a) 12 .146
INTERPRETATION: The above table shows that as the chi square thesignificance value is 0.146, which is insignificant. It shows that theoccupation does not have the direct bearing with the govt. policy schemesmade for subsidy.education * forma.easy Cross tabulation
Countforma.easy Total
SDA DA N A SA SDA
education
below10th 1 3 3 5 0 1210th-12th 1 2 4 3 0 10graduate 1 0 1 2 1 5
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postgraduate
0 1 1 1 0 3
Total 3 6 9 11 1 30
Chi-Square Tests
Value df Asymp. Sig.(2-sided)
Pearson Chi-Square 8.088(a) 12 .778
INTERPRETATION: The above table shows that as the chi square thesignificance value is 0.146, which is insignificant. It shows that theoccupation does not have the direct bearing with the govt. policy schemesmade for subsidy.Education * pro.not.com Cross tabulation
Countpro.not.com Total
DA N A DA
education
below10th 4 3 5 1210th-12th 3 4 3 10graduate 1 1 3 5
postgraduat 1 2 0 3
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eTotal 9 10 11 30
Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-Square 3.918(a) 6 .688
INTERPRETATION: The above table shows that as the chi square thesignificance value is 0.668, which is insignificant. It shows that theeducation level does not have the direct bearing with the complexity of the
process
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CONCLUSION
&
SUGGESTIONS
CONCLUSIONS AND SUGGESTIONS
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Micro finance market in India has made rapid strides both in terms of SHGslinked with the banks and the number of beneficiaries covered. The freedomgiven by the Reserve Bank of India has paved the way for its fast up scaling.Multi-model approach involving banks, NBFCs, Trusts, Foundations and
NGOs has paid rich dividends. Establishment of Micro FinanceDevelopment Fund has also helped the various entities for orderlydevelopment of micro-finance sector by providing required infrastructureand training system. Some of the impact assessment studies conducted byRBI, NABARD and select micro finance institutions reveal that microfinance has a very positive impact on the lives of the poor. It has emerged asa cost-effective, operationally simple and low-risk strategy for expandingclient base and business. It has afforded a positive institutional alternativeand has cut into the informal sector hold on rural market. Infact microfinance is making the informal sector accept benchmarking of formal credit.
Micro finance is not simply a banking activity; it is emerging as adevelopmental tool. Micro finance has ushered in the economicindependence of women and change in inter & intra-household dynamics.
FINDINGS & SUGGESTIONS
The survey and analysis of the questionnaire brought out a fact that thoughrural households are some how benefited through the micro finance but theyhave to face many problems because of the change of seasons, naturalcalamities and other geographical problems in the region.
While doing the survey in the Petlavad I come to know that only 25 to 30cases of subsidiary for tribal are approved by the institution and governmentevery year, many of the people could not get the benefit of the subsidy.
Micro credit and microfinance is not the answer to all the problems ofpoverty in developing countries, but it is indeed an 'inducer' to a great manyactions that can lead to a better quality of life for the low-income groups.
The mission of the micro finance is to help the poor people.
They are providing financial help. They view for helpingwomen and children. Women and children have importantrole to play in the society.
The most effective method of mainstreaming the poor and thedisadvantaged, particularly women, with the development process of thecountry is to give them access to formal financial services. In this context,
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micro-finance interventions are increasingly being accepted as effectivetools for poverty alleviation.
The role of banks in the successful micro-finance initiatives gainconsiderable importance in India, where, unlike in many other developingcountries, the formal banking system has a phenomenal reach of about1,50,000 retail rural outlets. These works out to one retail credit outlet forless than 5,000 rural people or say about 1,000 households. Through thisextensive network, the banks have provided credit of almost Rs 25,400 croreto over 5.5 crore rural poor households under different poverty alleviation
programmes. With around Rs 15,000 crore added to this as subsidy routed tothe poor through the same banking channels, this would normally beregarded as an effective step in meeting the financial needs of the rural
population.
LIMITATIONS
The study is limited to a particular region i.e. petlavad It is showingthe situation of Micro financing in the other small villages . So it isnot showing the picture of whole India.
The sample size is too small to give clear picture of the micro finance.
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ANNEXURE
QUESTIONNAIRE
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NAME (Optional):__________________________________
AGE 18-28 28-38
38-48 48 and above
GENDER Male Female
EDUCATION Below 10TH 10TH-12TH
Graduate Postgraduate
OCCUPATION Business Shopkeepers
Farmer Others
If FARMER Own land Rented land
MONTHLY INCOME Below 3000 3000-6000
6000-9000 Above 9000
FAMILY MEMBERS
NO. OF DEPENDENTS
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AMOUNT OF LOAN
RATE OF INTEREST
PURPOSE OF TAKING LOAN
TIME PERIOD
RESPONSE SCALE (Choose your order of preference and tick mark against it)
Strongly Disagree: SDA Disagree: DA Neutral: N
Agree: A Strongly Agree: SA
SDA DA N A
SA
.
1 The loan has benefited me
2 The loan helped me in fulfilling my purpose
3 The loan is easily provided
4 The loan sanctioning process is notcomplicated.
5. The formalities for procuring loan are easy
6 Number of documents need is not much
7 The govt. policies schemes made forproviding subsidy is satisfactory. .
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8 The subsidy provided by government.is sufficient
9 The services like repayment of loan and
other services provided by the MF institutionsin the area are good.
11 The interest charge is reasonable.
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BIBLIOGRAPHY
(A)WEBSITES:
WWW.GOOGLE SEARCH.COM
stanford.edu/2003/briefing_book/india.html
http://www.google/http://www.google/ -
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microfinanceindia.org
www.microfinance.in/
wikipedia.org
www.microfinanceinsights.com
www.un.org.in
www.NewLifeMFI.org
Introduction
What is Micro Finance?
Microfinance
http://www.microfinance.in/http://www.microfinance.in/http://www.microfinance.in/http://www.microfinance.in/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.un.org.in/http://www.microfinance.in/http://www.microfinanceinsights.com/http://www.un.org.in/ -
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refers to the provision of financial services topooror low-income clients,including consumers and the self-employed. The term also refers to the
practice ofsustainably delivering those services. Microcredit (or loans topoormicroenterprises) should not be confused with microfinance, whichaddresses a full range of banking needs for poor people.
More broadly, it refers to a movement that envisions a world in which asmany poor and near-poor households as possible have permanent access toan appropriate range of high quality financial services, including not justcredit but also savings, insurance, and fund transfers. Those who promotemicrofinance generally believe that such access will help poor people out of
poverty.
Origin of Micro Finance:
The origin of micro finance is quite absorbing. Ipso facto, micro financecombines the strengths of both formal and informal systems of purveyingcredit. Availability of hassle free credit in a systematic manner is the uniquefeature of micro finance system.
Micro finance in informal system was in vogue in India in the form of chitfunds, etc., since time immemorial. It came into existence under formalsystem with the advent of co-operative movement in India in the beginningof the last century. The micro finance is primarily based on the principles of
co-operation namely, mutual help, democratic functioning, etc. Though, theco-operative movement was initially envisaged with unlimited liability andsmall size of societies consisting of homogenous groups, over the years inthe quest for improving the viability of co-operatives, large societies withlimited liabilities were organized. This apart, the evolution of State
partnership in co-operatives with entrenched bureaucracy, etc., distanced co-operative movement from the spirit of micro finance movement.
Nevertheless, micro finance movement in its present form is the valuable
contribution of Bangladesh to the world and Prof. Mohammed Yunus isconsidered the father of modern micro finance movement. Mostly the ruralpoor were caught in the clutches of money lenders as their access to creditfrom the banking system was constrained due to lack of collaterals and theirignorance. Hence, a beginning was made with a research project at Jabravillage by Prof. Mohammed Yunus of Chittagong University way back in1976 by giving small loans without collaterals to the poor who were
http://en.wikipedia.org/wiki/Povertyhttp://en.wikipedia.org/wiki/Sustainablehttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microenterprisehttp://en.wikipedia.org/wiki/Social_movementhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Remittanceshttp://en.wikipedia.org/wiki/Povertyhttp://en.wikipedia.org/wiki/Sustainablehttp://en.wikipedia.org/wiki/Microcredithttp://en.wikipedia.org/wiki/Microenterprisehttp://en.wikipedia.org/wiki/Social_movementhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Remittances -
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organized into small groups. The idea worked well and demand for creditincreased manifold. The process was repeated and the institution promoted
by Yunus expanded its operations and came into existence as a specializedinstitution for financing the rural poor under Grameen Bank Ordinance ofthe Government of Bangladesh in 1983. The success of Grameen Bankmodel inspired its replication in one or the other form in many parts of theworld. Under Bangladesh model, borrowers or savers join together to formgroups consisting of five members to transact the business. The philosophyof voluntarism and one for all and all for one is the backbone of microfinance movement. The group also leads to mutual empowerment along withthe advantage of peer pressure on the behavior of group members.
Literature Review
A Brief History of Microfinance in India
The post-nationalization period in the banking sector, circa 1969, witnesseda substantial amount of resources being earmarked towards meeting thecredit needs of the poor. There were several objectives for the bank
nationalization strategy including expanding the outreach of financialservices to neglected sectors. As a result of this strategy, the bankingnetwork underwent an expansion phase without comparables in the world.Credit came to be recognized as a remedy for many of the ills of the poverty.There spawned several pro-poor financial services, support by both the Stateand Central governments, which included credit packages and programscustomized to the perceived needs of the poor.
The pioneering efforts at this were made by National Bank forAgriculture and Rural Development (NABARD), which was given the tasksof framing appropriate policy for rural credit, provision of technicalassistance backed liquidity support to banks, supervision of rural creditinstitutions and other development initiatives.In the early 1980s, the GoI launched the Integrated Rural DevelopmentProgram (IRDP), a large poverty alleviation credit program, which providedgovernment subsidized credit through banks to the poor. It was aimed thatthe poor would be able to use the inexpensive credit to finance themselves
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over the poverty line. Also during this time, NABARD conducted a series ofresearch studies independently and in association with MYRADA, a leadingnon-governmental organization (NGO) from Southern India, which showedthat despite having a wide network of rural bank branches servicing therural poor, a very large number of the poorest of the poor continued toremain outside the fold of the formal banking system. These studies alsoshowed that the existing banking policies, systems and procedures, anddeposit and loan products were perhaps not well suited to meet the mostimmediate needs of the poor. It also appeared that what the poor reallyneeded was better access to these services and products, rather than cheapsubsidized credit.
Against this background, a need was felt for alternative policies,systems and procedures, savings and loan products, other complementaryservices, and new delivery mechanisms, which would fulfill the
requirements of the poorest, especially of the women members of suchhouseholds. The emphasis therefore was on improving the access of the poorto microfinance rather than just micro-credit.
To answer the need for microfinance from the poor, the past 25 years hasseen a variety of microfinance programs promoted by the government and
NGOs. Some of these programs have failed and the learning experiencefrom them have been used to develop more effective ways of providingfinancial services. These programs vary from regional rural banks with asocial mandate to MFIs. In 1999, the GoI merged various credit programstogether, refined them and launched a new programme called SwaranjayantiGram Swarazagar Yojana (SGSY). The mandate of SGSY is to continue to
provide subsidized credit to the poor through the banking sector to generateself-employment through a self-help group approach and the program hasgrown to an enormous size.
Research Problem
In the development paradigm, micro-finance hasevolved as a need-based policy and programme to cater to the so farneglected target groups (women, poor, rural, deprived, etc.). Its evolution is
based on the concern of all developing countries for empowerment of thepoor and the alleviation of poverty. Development organizations and policy
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makers have included access to credit for poor people as a major aspect ofmany poverty alleviation programmes.
Micro-finance programmes have, in the recent past, become one of the morepromising ways to use scarce development funds to achieve the objectives ofpoverty alleviation. Furthermore, certain micro-finance programmes havegained prominence in the development field and beyond. The basic idea ofmicro-finance is simple: if poor people are provided access to financialservices, including credit, they may very well be able to start or expand amicro-enterprise that will allow them to break out of poverty.
Thus, micro-finance has become one of the most effective interventions foreconomic empowerment of the poor.
Objective of the study
The main objectives of the research are as under:
To study how micro financing is helpful for poor households,helping them raise income, build up assets and/or cushion themagainst external shocks.
To analyze the nature of population going for micro finance.
To analyze the quality of services provided by micro financ and to knowsatisfaction of customer
Methodologies
SourcesBook
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MagazineInternetArticles
Define Study period4 months
Methodology of testing
To carry on this research project I will adopt the probability samplingmethod, under which whole strata has the probability of being included inthe sample. A sample will be taken and the information will be collectedwith the help of:
Questionnaire
Direct interviews
The above method will focus on collection of information throughPrimary Data, apart from this the research project will also take help of theSecondary Data available.
The information so collected will be presented in the form of
Tables Bar graphs
Pie charts
Histograms
Bibliography
(A)WEBSITES:
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WWW.GOOGLE SEARCH.COM
stanford.edu/2003/briefing_book/india.html
microfinanceindia.org
www.microfinance.in/
wikipedia.org
www.microfinanceinsights.com
www.un.org.in
www.NewLifeMFI.org
Institute of Management Studies DAVV, Indore
http://www.google/http://www.microfinance.in/http://www.microfinance.in/http://www.microfinance.in/http://www.microfinance.in/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.microfinanceinsights.com/http://www.un.org.in/http://www.google/http://www.microfinance.in/http://www.microfinanceinsights.com/http://www.un.org.in/ -
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Master in Business Administration
(Disaster Management)Batch- 2007-09
Synopsis on
MICRO FINANCING
Submitted to: Submitted by:Prof. Nisha Siddhiqui Manish Kumar
IMS,DAVV M.B.A (D.M)IVth sem