abhishek mrp
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CONTENTSSr. No. Particulars Page Nos.
1 Introduction Of Microfinance 2 – 7
2 Review Of Literature 8 – 9
3 Rationale Of The Study 10
4 Objective Of The Study 10
5 Methodology 11
6 Poverty In Indore & Their Needs 12-14
7 Remittance Requirement 15
8 Microfinance Terminology 16-18
9 Data Analysis & Interpretation 19-28
10 Service Volume 29-42
11 Challenge For Microfinance 43-44
12 Suggestion 45
13 Conclusion 46
14 Bibliography & Webliography 47-48
15 Questionnaire 49-50
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INTRODUCTION
Microfinance is the provision of financial services to those who
are excluded from conventional commercial financial services
since most are too poor to offer much - or anything - in the way
of collateral. It presents a series of exciting possibilities for
extending markets, reducing poverty and forecasting social
change.
The concept of microfinance originated in the mid-1970s in
Bangladesh through a pioneering experiment by Dr. Muhammad
Yunus, then a Professor of Economics. His aim was to offer
poor people:
financial services
entrepreneurship opportunities
an end to mistreatment by money lenders
a system where they could produce, manage and maintain
their own finances
CONCEPT AND FEATURES OF MICRO-FINANCE
a) Micro-
credit:
Small loans; primarily for income generation
activities, but also for consumption and
contingency needs.
b) Micro-
savings
:
Thrift or small savings from borrowers ‘own
resources.
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The main features of the micro-finance services
1. It is a tool for empowerment of the poorest; the higher the
income and better the asset position of the borrower, the
lower the incremental benefit from further equal doses of
micro-credit is likely to be.
2. Delivery is normally through Self Help Groups (SHGs).
3. It is essentially for promoting self-employment; the
opportunities of wage employment are limited in
developing countries - micro finance increases the
productivity of self-employment in the informal sector of
the economy - generally used for (a) direct income
generation (b) rearrangement of assets and liabilities for
the household to participate in future opportunities and (c)
consumption smoothing.
4. It is not just a financing system, but a tool for social
change, specially for women - it does not spring from
market forces alone - it is potentially welfare enhancing -
there is a public interest in promoting the growth of micro
finance - this is what makes it acceptable as a valid goal
for public policy.
5. Because micro credit is aimed at the poorest, micro-
finance lending technology needs to mimic the informal
lenders rather than the formal sector lending. It has to
(a) Provide for seasonality
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(b) Allow repayment flexibility
(c) Eschew bureaucratic and legal formalities
(d) Fix a ceiling on loan sizes.
"Microfinance institutions (MFIs) are those which provide
thrift, credit and other financial services and products of very
small amounts mainly to the poor in rural, semi-urban or urban
areas for enabling them to raise their income levels and improve
living standards".
MFIs have emerged broadly under three categories:
i). Not-for-Profit MFIsSocieties registered under Societies Registration Act, 1860 or
similar State Acts
Public Trusts registered under the Indoren Trust Act, 1882
Non-profit Companies registered under Section 25 of the
Companies Act, 1956
ii). Mutual Benefit MFIs
State credit cooperatives
National credit cooperatives
Mutually Aided Cooperative Societies (MACS)
iii). For-Profit MFIs
Non Banking Financial Companies (NBFCs) registered under
the Companies Act, 1956Banks which provide MF along with
their other usual banking services could be termed as mF service
providers.
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INDORE OVERVIEW
An official Census 2011 detail of Indore, a district of Madhya
Pradesh has been released by Directorate of Census Operations
in Madhya Pradesh. Enumeration of key persons was also done
by census officials in Indore District of Madhya Pradesh.
In 2011, Indore had population of 3,272,335 of which male and
female were 1,700,483 and 1,571,852 respectively. There was
change of 32.71 percent in the population compared to
population as per 2001. In the previous census of Indore 2001,
Indore District recorded increase of 34.30 percent to its
population compared to 1991. The initial provisional data
suggest a density of 839 in 2011 compared to 633 of 2001. Total
area under Indore district is of about 3898 s.q. k.m. Average
literacy rate of Indore in 2011 were 82.32 compared to 75.15 of
2001. If things are looked out at gender wise, male and female
literacy were 89.22 and 74.89 respectively. For 2001 census,
same figures stood at 84.60 and 64.81 in Indore District. Total
literate in Indore District were 2,358,338 of which male and
female were 1,324,967 and 1,033,371 respectively. In 2001,
Indore District had 1,575,436 in its total region.
With regards to Sex Ratio in Indore, it stood at 924 per 1000
male compared to 2001 census figure of 912. The average
national sex ratio in Indore is 940 as per latest reports of Census
2011.
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In census enumeration, data regarding child under 0-6 age were
also collected for all districts including Indore. There were total
407,536 children under age of 0-6 against 369,546 of 2001
census. Of total 407,536 male and female were 215,446 and
192,090 respectively. Child Sex Ratio as per census 2011 was
892 compared to 908 of census 2001. In 2011, Children under 0-
6 formed 12.45 percent of Indore District compared to 14.99
percent of 2001. There was net change of -2.54 percent in this
compared to previous census of Indore.
Indore District population constituted 4.51 percent of total
Madhya Pradesh population. In 2001 census, this figure for
Indore District was at 4.51 percent of Madhya Pradesh
population.
Indore district major population is also live in villages. But only
five villages has been considered for the research work. Talking
about the Rau, which is a first village where the research
program is conducting. Rau is a developing industrial area of
Indore. Where live around three - four thousand people. Main
income of source of people is farming, laboring and business.
Chitawad is second village villages where the research program
is conducting with circulate questionnaire. It’s also rural and
developing area of Indore district. People of this village are
working on his farm and some people also working in factory as
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a labour. It’s a small village where live around two thousand
people.
Devguradiya is third village villages where the research program
is conducting. It’s a religious and rural backward area, where
people totally devoting to God. Where live around one thousand
people.
Mangalaya is our next village where conducting all research
program. It’s a well developing area and also part of Indore city.
In this village petroleum companies are establishing his refinery
and it’s also source of people of village. Mangalaya is also part
of Indore city than people are going to city for income. It’s a
develop village where live around four – five thousand people.
Lasudiya mori is our last place villages where the research
program is conducting. It’s also a big and developing village
where people well known about microfinance. This is famous
for showroom of automobile companies. The main source of
income of people is farming & business. Where live around five
thousand people.
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REVIEW LITERATURE
These literatures include books written on the subject by experts
and also journals, manuals etc. In fact, there are very few
literatures available, regarding socio-economic, political and
entrepreneurial development of women.
Dr.C.Rangarajan (2006) in his topic ‘Microfinance and its
future directions’ in the introductory part of the book, outline
the evolution of SHG through microfinance evolve through in
three stages. First, to meet survival requirement need, in the
second stage is to meet the subsistence level through investing
in tradition activities and in the final stage by setting up of
enterprises for sustainable income generation.
Robert Peck Christen (2006) in his paper “Microfinance and
Sustainable International Experience and lesson for Indore”, he
articulates the changing general perception of bankers, that
SHGs are profitable clients or bank.
Lanmdau Mayoux’s study (1998) on Participatory Learning
for Women’s Empowerment in Micro Finance Programs
proposes a participatory approach for integrating women’s
empowerment concerns into ongoing programs learning, which
itself would be a contribution to empowerment. Micro finance
programs for women are currently promoted not only as a
strategy for poverty alleviation but also for women’s
empowerment.
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Article of G. Buckley (1997) microenterprises in the informal
sector in Kenya, Malawi Ghana. It seeks to provoke critical
reflection on the uncritical enthusiasm that lies behind much
proselytizing of microfinance for informal sector
microenterprise. It questions whether the extensive donor
interest in microenterprise finance really addresses the problems
of micro entrepreneurs.
Vinay K Srivatava and Arvind Singh (2010) in their article
stated that the micro finance has contributed to its success is its
credit-plus approach – where the focus has not only been on
providing adequate and timely credit to low income groups, but
to integrate it with other developmental activities. He says it is
important to understand that the concept of microfinance is not
new. The precedence for microfinance lies in the numerous
traditional and informal systems of credit.
Robert peck christen 2006 in his paper “microfinance and
sustainable international experience and lesson for India” he
articulate the changing general perception of bankers that SHGs
are profitable clients are banks.
In the above context, various are the view points given by
researchers in the field of Microfinance. Here, in the present
Study the focus is on villages of Indore, to know the awareness
of microfinance among poor peoples and how the people of
Indore get the benefit of Microfinance.
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RATIONALE OF THE STUDY
Indore’s rural poor are overwhelmingly dependent on
agriculture as their primary source of income; the majority is
marginal or small farmers, and the poorest households are
landless. The financial needs of Indore’s rural poor reflect the
volatile, uncertain and irregular income streams and expenditure
patterns of these households. Many Banks providing Micro
financing aimed at empowering women so that they can be able
to create their own business. Microfinance industry not only
helps them pull themselves out of poverty, but it also promotes
gender equity throughout out the world. Microfinance loans
helps to create sustain impact by educating recipients on how to
create their own business and how to properly manage and grow
their money. Microfinance allows the poor to gate the loans they
need to save invest and create a sustainable life style of financial
independence and growth these loans are used productively by
the poor to create there owns business.
OBJECTIVES OF THE STUDY
1. To measure effectiveness of microfinance on village People of Indore
2. To study how micro financing empower women.
3. To analyze how microfinance reduce poverty in Indore.
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RESEARCH METHODOLOGY
The Study: The present study “an impact of microfinance on
poverty in related to villages of Indore” is exploratory in nature.
Data Collection: Research is based on primary data. Secondary
data is also used. Primary data has been collected by interacting
with various people, through structured Questionnaire. The
secondary data has been collected through various journals,
magazines, website.etc.
Analysis of the Data: The analysis of data has been done on
percentage basis. Graphic representation of the data has been done
through Pie Charts.
Sample size: The sample size is of 100 People of village in Indore
district.
Sampling Method: The method used for sample technique was
stratified random sampling method.
Selection of Study Area: The research has been conducted on
People of village. The sample size used here was 100 people of
villages in Indore district, who belongs to different Villages of
Indore. The study has been conducted by considering 5 villages
of Indore namely Rau, Chitawad, devguradiya, Mangalaya and
Lasudiya mori etc. regarding Microfinance services used in
villages of Indore.
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Poverty in Indore
Poverty in Indore and Indore is still rampant despite an
impressive economic growth. An estimated 0.65 million people
are below the poverty line and approximately 63 per cent of
them are in the rural areas. In general, poverty can be defined as
a situation when people are unable to satisfy the basic needs of
life. The definition and methods of measuring poverty differs
from country to country. According to the definition by
Planning Commission of Indore, poverty line is drawn with an
intake of 2400 calories in rural areas and 2100 calories in urban
areas. If a person is unable to get that much minimum level of
calories, then he/she is considered as being below poverty line.
Causes of Poverty in Indore
High level of dependence on primitive methods of
agriculture
High population growth rate
High Illiteracy (about 27% of adult population)
Regional inequalities
Protectionist policies pursued till 1991 that prevented high
foreign investment.
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Problems Faced by village people of Indore
One of the major problems with poverty alleviation programs is
their implementation. Rajiv Gandhi once said that out of 100
paisa allocated for poor only 14 paisa reaches them. But in spite
of their weaknesses, poverty alleviated program can be credited
for their success in alleviating poverty to an extent. Greater
public-private partnership and committed and efficient
bureaucratic machinery is required to tackle poverty.
Since its independence, the issue of poverty within Indore has
remained a prevalent concern. According to the common
definition of poverty, when a person finds it difficult to meet the
minimum requirement of acceptable living standards, he or she
is considered poor.
Many people in Indore are unable to meet these basic standards,
and according to government estimates, in 2008 there were
nearly 0.22 million people living below the poverty line.
Nearly 18.9% of the entire rural population and 21% of the
urban population of Indore exists in this difficult physical and
financial predicament.
The poverty ratios illustrated here are divided in two types:
urban and rural. Specific reasons for poverty vary in the urban &
rural setting; A number of factors are responsible for poverty in
the rural areas of Indore. Rural populations primarily depend on
agriculture, which is highly dependent on rain patterns and the
monsoon season. Inadequate rain and improper irrigation
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facilities can obviously cause low, or in some cases, no
production of crops.
Additionally, the Indoren family unit is often very large, which
can amplify the effects of poverty. The government has planned
and implemented poverty eradication programs, but the benefits
of all these programs have yet to reach the core of the country.
Poor’s and their needs
With the rapid growth of big cities, slums, the breeding grounds
of urban squalor and Poverty, swell primarily due to increased
migration of the poor from the villages in search of better
employment opportunities and improved standard of living. All
poor, however, do not live in slums. In fact, the urban poor
population in the country is estimated to be nearly eight crore
whereas the slum population hovers around four crore. Most of
the working population in urban areas work under utterly
deplorable conditions in unorganized sector with a very few
livelihood options.
The deprivation of urban poor is further accentuated as more
than 40 percent of adult Indoren urban population has no access
to a bank account (this figure would be more if multiple
accounts held by individuals are factored), and, thereby
depriving them of savings, credit, remittance and other financial
service facilities from the formal financial system.
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Against this background, this paper tries to study the issues and
options involving financial inclusion of the urban poor.
Managing savings well by the urban poor is critically important
but often neglected leading to absence of a secured source of
finance to meet life cycle as well as Investment needs.
REMITTANCE REQUIREMENT
In Indore, huge flow of migrants, poor and the not-so-poor,
crises-cross the country in search of a better life for themselves
and their families who mostly stay behind in their villages. They
take up non-contractual and nonpermanent jobs, such as, house
help, security guards, daily wage laborers, hawkers, beggars
staying on the streets and petty workers working in and around
the industrial areas in cities.
These migrants need a fast, low cost, convenient, safe and
widely accessible remittance service to send money to their
families and dependents to meet their consumption needs and
other life cycle needs in particular, medical emergencies. Safe,
speedy and affordable means of remittance, however, remains a
major problem for the migrant domestic lab our in urban, many
of whom unlike overseas migrants do not even have bank
accounts either at their native places or their work places.
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MICROFINANCE TERMINOLOGY
Micro credit: This is a small amount of money loaned to a
client by a bank or other institution. Micro credit can be offered,
often without collateral, to an individual or through group
lending.
Microfinance: This refers to loans, savings, insurance, transfer
services and other financial products targeted at low-income
clients
Micro insurance: This is a system by which people, businesses
and other organizations make payments to share risk. Access to
insurance enables entrepreneurs to concentrate more on growing
their businesses while mitigating other risks affecting property,
health or the ability to work.
Remittances: These are transfer of funds from people in one
place to people in another, usually across borders to family and
friends. Compared with other sources of money that can
fluctuate depending on the political or economic climate,
remittances are a relatively steady source of funds.
Micro savings: These are deposit services that allow people to
store small amounts of money for future use, often without
minimum balance requirements. Savings accounts allow
households to save small amounts of money to meet unexpected
expenses and plan for future investments such as education and
old age. Inclusive financial sectors: It allows poor and low
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income people to access credit, insurance, remittances and
savings products. In many countries, the financial sectors do not
provide these services to the lower income people. An inclusive
financial sector will support the full participation of the lower
income levels of the population.
Micro entrepreneurs: These are people who own small scale
businesses that are known as micro enterprises. These
businesses usually employ less than 5 people and can be based
out of the home. They can provide the sole source of family
income or supplement other forms of income. Typical micro
entrepreneur activities include retail kiosks sewing workshops,
carpentry shops and market stalls.
Bankable: These people are those deemed eligible to obtain
financial services that can lead to income generation, repayment
of loans, savings, and the building of assets.
Unbanked: This describes people who have no access to
financial services through any type of financial sector
organization such as banks, non-bank financial institutions,
financial cooperatives and credit unions, finance companies, and
NGOs. Implicit in this definition is that financial services are
usually available only to those individuals termed
"Economically active" or bankable.
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MICROFINANCE DELIVERY METHODOLOGIES
The sheer geographical size of the country, a wide range of
social and cultural groups, the large spectrum of economic
classes and a variety of NGOs movement has contributed
towards the diversity of microfinance models in Indore.
Some of the common models used in Indore are
1) Self help group model
2) Grameen model
3) Cooperative/mutually aided cooperative model
4) Non banking company finance model
5) Bank using other agencies for distribution of microfinance
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DATA ANALYSIS & INTERPRETATION
(i) Number of people having knowledge about Microfinance:
People Response (in %)
Yes 36
No 64
Chart: - 1
Interpretation-
The above chart shows that 36% of the respondents were having
knowledge about Microfinance and 64% of the respondents were not
having any knowledge about Microfinance. Thus the research work
includes people knowledge about Microfinance.
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(ii) Facilities of Microfinance schemes using
by people:
People Respondents (in
%)
Yes 34
No 66
Chart:-2
Interpretation-
This reveal that 34% of the respondents were using Microfinance
schemes & services and 66% of the respondents were not using
Microfinance schemes & services. Thus the research work includes
use of Microfinance schemes by people.
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(iii)Microfinance schemes reduce the poverty:
People Respondents (in %)
Yes 48
No 28
Don’t know 24
Chart:-3
Interpretation-
According to Bar chart, 48% of the respondents were says that
Microfinance schemes are helps to reduce poverty, 28% of the
respondents were not says that Microfinance schemes are helps to
reduce poverty and 24% respondents were don’t know about this.
Thus the research work includes help of Microfinance schemes for
reduce poverty.
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(iv) Source of income of people:
Farming Self Generated Laboring Business Others
54% 09% 27% 03% 07%
Chart:-4
Interpretation-
This chart exhibits that 54% of the respondents engaged in farming
for income, 09% of the respondents are self employed, 27% of the
respondents do laboring for his income, 03% of respondents engaged
in their business for his income and 24% respondents are doing other
work for his income. Thus the research work includes source of
income of the people.
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(v) The Source of Microfinance:
Informal Source 10%
SHG 45%
Banks 36%
Others 09%
Chart:-5
Interpretation:
The above chart represent that 10% of the respondents says that
informal source is a microfinance source, 45% of the respondents says
that SHG is source of microfinance, 36% of the respondents says that
Banks are source of microfinance and 09% respondents says that
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others groups are source of microfinance. Thus the research work
includes source of microfinance.
(vi) How do you know about microfinance:
Family member &
Relatives
Friends & Peers Magazines &
Generals
Others
15% 22% 36% 27%
Chart:-6
Interpretation-
About 15% of the respondents say that family member & relatives are
give knowledge about microfinance, 22% of the respondents says that
Friends & Peers are give knowledge about microfinance, 36% of the
respondents says that Magazines & Generals are give knowledge
about microfinance and 27% of the respondents says that others are
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give knowledge about microfinance. Thus the research work includes
knowledge of microfinance.
(vii) How long the people availing Microfinance Schemes:
None 36%
0 years to 2 years 27%
2 years to 3 years 18%
More than 3 year’s 19%
Chart:-7
Interpretation-
36% of the respondents says they aren’t use microfinance schemes,
27% of the respondents says they are use microfinance during 0-2
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years, 18% of the respondents says they are use microfinance during
2-3 years and 19% of the respondents says they are use microfinance
more than 3 years. Thus the research work includes use of
microfinance with time duration by people.
(viii) Main & basic objective of microfinance:
Reduce Poverty 54%
Increasing Income 09%
Empowering of women 27%
Self Employment 10%
Chart:-8
Interpretation-
The above chart shows around 54% of the respondents reveal that
‘reduce poverty’ is basic object of microfinance schemes, 09% of the
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respondents says that ‘Increasing Income’ is basic object of
microfinance, 27% of the respondents says that ‘Empowering of
women’ is basic object of microfinance and 10% of the respondents
says that ‘Self Employment’ is basic object of microfinance. Thus the
research work includes Basic object of microfinance.
(ix) Factors which is influencing the growth of microfinance:
Availability of
loan
Flexibility Low interest
rate
Installment
Availability
47% 11% 24% 18%
Chart:-9
Interpretation-
This shows that 47% of the respondents says that ‘Availability of
loan’ is a factor which influencing microfinance, 11% of the
respondents says that ‘Flexibility’ is a factor which influence
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microfinance, 24% of the respondents says that ‘Low interest rate’ is
a factor of microfinance and 18% of the respondents says that
‘Installment Availability’ is a factor of microfinance. Thus the
research work includes about factors whose is influencing growth of
microfinance.
(x)Microfinance is also doing changes in standard of living:
Strongly
Agree
Agree Neutral Disagree Strongly
Disagree
18% 39% 11% 23% 09%
Chart:-10
Interpretation-
This chart represent tha18% of the respondents are strongly agree
about changes in standard of living by microfinance, 39% of the
respondents agree about changes in standard of living by
microfinance, 11% of the respondents are Neutral about changes in
standard of living by microfinance, 23% of the respondents
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disagree about changes in standard of living by microfinance and
09% of the respondents are strongly disagree about changes in
standard of living by microfinance. Thus the research work includes
about changes in standard of living by microfinance schemes.
SERVICE VOLUMES
In the financial year 2008/09, Microfinance in Indore through
its two major channels – SBLP and MFIs – served over 3.5
million Indoren, up by 0.9 million over the previous financial
year. 4 out of 5 microfinance clients in Indore are women. Per
31st March 2011, the outstanding micro-credit portfolio of
Indore Microfinance was about Rs. 2,200 crore. 75% are
accounted for by SBLP, 20% by large MFIs and 5% by medium
and small MFIs.
SBLP reports over Rs. 350 crore savings of SHG-members
(2006/07). MFIs are prohibited from accepting savings;
however, one third of their clients are served under the SHG-
model and thus encouraged to save among themselves and/or
open savings accounts with banks. The MFI KBS Local Area
Bank reports about Rs. 40 crore savings portfolio for its 1 lack
clients (2007/08).
From The Bharat Microfinance Report 2010:
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* SHG-Bank Linkage Programme is spearheaded and implemented By NABARD. Figures in italics are estimates; see Sa-Dhan (2008) for details.
** The total has been reduced by 15% of MFI-figure, assumed to be the overlap with SBLP.
Highlights of the Bharat Microfinance Report - Quick-Data
2008-09
Sa-Dhan Quick-data set is the most timely – the quickest – of
any segment of the financial sector. Indore Microfinance is
proud to take once again the lead in disclosing performance over
the last financial year which ended on 31st March 2008.
Highlights recorded are
Growth of MFI- loan portfolios passed 70% annually between
March2008 and March 2011. The strongest impulse came from
medium – often urban – MFIs in 2008/09 and from large MFIs
in 2008/09.
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Outstanding Portfolio (in Rs. Crore)
SBLP* 1,064 1,690
Sa-Dhan, 223 MFIs 356 554
Total** 1,420 2,244
Client Outreach (in million persons)
SBLP* 16.01 21.57
Sa-Dhan, 223 MFIs 10.04 14.1
Total** 24.55 33.55
Indoren MFIs are true to their mission of serving the poor
strata of society. A stable 8 out of 10 clients have been provided
loans sized less than Rs. 10,000.
The loan segment between Rs. 5,000 and Rs 10,000 has been
growing strongest. This can be explained by two impulses: On
one hand, microfinance customers mature to bigger loans over
the loan cycles. On the other hand, urban microfinance starts
with comparatively bigger loans than rural finance.
From The Bharat Microfinance Report 2008-09:
Indorian MFIs serves 0.41 million clients from the SC/ST
background. The reported number of SC/ST has been growing
alongside the rate of total outreach, thus the SC/ST-share is
stable at 3 out of 10 clients.
From The Bharat Microfinance Report 2009:
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Large MFIs are particularly active in expanding their
operations to the poorest districts; many of them serving poorest
than other districts.
Urban Microfinance is emerging as a strong growth driver;
between March 2006 and March 2008, 1 out of 3 new clients
was from the urban background. One Quarter of all MFI clients
is from the urban background.
THE MICROFINANCE INSTITUTIONS (MFIS)
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For its 2011-Quick-Report SA-Dhan collected and validated
data from 231 MFIs. Ultimately, between 216 and 223 were
validated for analysis, up from 129 in the previous Quick-
Report. Most MFIs are societies and trusts. Among the large
MFIs, most are NBFCs, but not-for-profit organizations are also
counted in this category. Most of the cooperative banks in the
sample are urban-based. Out of 4 Local Area Banks licensed by
RBI, AP-based KBS is included in the sample.
From The Bharat Microfinance Report 2011:
MFIs
with Loan
Portfolio
up to 5
crore
MFIs with
Loan
Portfolio
>5 to 50
crore
MFIs with
Loan
Portfolio
over 50
crore
Total
No
of
MFIs
Society 87.7 543.8 478.3 1,109.7 104
Trust 24.0 149.8 225.4 399.3 31
Cooperative
Bank8.3 - - 8.3 8
MACS 5.2 11.0 - 16.2 10
Section 25
Company11.6 127.4 543.6 682.6 22
NBFC 10.6 197.3 3,312.1 3,520.0 25
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LAB or any
other13.6 13.7 134.7 1,62.0 16
Total 161.0 1,043.0 4,694.1 5,898.2
No of MFIs 137 57 22 216
MFI PERFORMANCE IN INDORE: 2008 – 2011
A 2008 - 2011 survey of Indore’s leading 15 MFIs shows the
industry’s strength in both size and growth. While MFIs
globally and within the region average less than 20,000 clients
per institution, well managed Indoren micro finance institutions
already rank top in outreach, despite their relative young age;
with nearly a decade more experience, only Bangladeshi
institutions reach more borrowers.
TOP MICRIFINANCE INSTITUTES IN INDORE
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Not to be left behind, Indoren institutions top the charts of all 78
countries surveyed in 2008 for their phenomenal growth rates,
the median leading MFI doubling coverage in a single year. In
fact, five of the top 20 fastest growing MFIs in 2005 were
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Indoren, from a survey of nearly 450 institutions worldwide.
While global microfinance talks about increasing commercial
capital available to MFIs and of integrating with local financial
markets, Indoren microfinance defines the forward lines of this
movement. Within Asia and around the globe, Indoren MFIs are
more leveraged than institutions in any other sector. Compared
to other markets in South Asia, the Importance of local financial
institutions is readily apparent. Bangladeshi and Pakistani MFIs
have built large institutions on the backs of soft money. Indoren
MFIs, on the other hand, deprived of shareholder capital or legal
access to public deposits, have funded growth through
Commercial loans from local banks and development finance
institutions. Tapping local financial markets leaves the sector
well poised to continue its rapid growth.
Loans to Indoren MFIs fulfill more than priority sector lending
requirements; they also fulfill the need for returns. Leading
MFIs offer slim, but positive margins. Hardly the high returns
presented in recent media coverage, leading institutions
averaged just less than 1% return on assets
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BANKS INITIATIVES
Banks need to take up the financial inclusion efforts not only as
a part of their corporate social responsibility but as a vibrant
business model. A few banks like the Union Bank of India,
Indian Bank and Citi Bank have now launched pilots using such
ICT tools to financially include disadvantaged groups in
cities/towns. Union Bank of India is covering the hawkers in
Mumbai (Box 6) and Indian Bank has launched the programme
to open “no-frills” accounts at the door step of the migrants
staying in Dharavi slums in Mumbai with the assistance of the
local community leaders, NGOs (“Nirman”) and provide ATM
facility and smart cards to them in association with technology
provider like FINO.
With rapid growth of urbanisation, social engineers have been
compelled to give attention to providing financial services to
meet the savings, credit, remittance and other financial
requirements of the urban poor and not so poor engaged in the
informal/unorganized sectors. Financial inclusion should not
begin and end with opening of bank accounts. In fact, product
innovation in financial services keeping in view their life cycle
needs is the need of the hour. Rolling out of an innovative
financial product, however, should not be undertaken without
adopting a systematic approach that involves conducting market
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research on the financial needs, developing a proto type,
analysing the associated risks, pilot testing of the product, etc..
MICROFINANCE-A TOOL TO IMPROVE SOCIO-
ECONOMIC STATUS OF INDORE PEOPLE
Indore has the one of the fast developing country in the world.
Indore’s ‘first world’ economy is oriented to the very highest
standards of globalize consumption, and formal sector incomes
and lifestyles reflect this. By contrast, the real incomes and
‘lifestyles’ of the very poor, particularly in rural areas, are
comparable very low. Micro-finance is often advocated as a
solution to multiple social problems in Indore. Poor Persons
with access to credit can make investments in enterprises that
bring them out of poverty.
Over the last few years, savings and credit groups have also
helped to manage some important social programs of the
Indoren government, such as the distribution of food grains and
school meals in state primary schools.
Income in Indore is closely linked to social and economic status:
whilst the upper and middle classes inhabit the ‘formal’ income
from their formal ventures and employment,
in other hand the poorest and low income status are largely
‘informally’ employed. Low income households are not usually
involved in regular income and therefore waiting for job
creation strategies to absorb them; they ‘permanently inhabit’ a
dependent segment of the so called developing Indoren
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economy, in which opportunities for jobs, or for independent
and self sustaining entrepreneurial capital accumulation, are
minimal. Though poverty reduction has long been a high
priority for the Government of Indore, microfinance is a still
experimental tool in its overall strategies. Indore’s microfinance
experiments are much differ from the more substantial
microfinance institutions and programmes of its neighbors
countries. The United Nations system was perhaps the first
international partner to Indore’s new experiment with small
scale credit schemes.
Most of poor people manage to optimize resources over a time
to develop their enterprises. Financial services could enable the
poor to leverage their initiative, accelerating the process of
generating incomes, assets and economic security. However,
conventional finance institutions seldom lend down-market to
serve the needs of low-income families and women-headed
households.
They are very often denied access to credit for any purpose,
making the discussion of the level of interest rate and other
terms of finance irrelevant. Therefore the fundamental problem
is not so much of unaffordable terms of loan as the lack of
access to credit itself. The impact of microfinance on poverty
reduction has been measured in terms of several dimensions,
such as improved income, employment and household
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expenditure, and reduced vulnerability to economic and social
crises.
These measurements have tended to focus on a specific
geographic area, an institution or a small client group and are
difficult to generalize or draw conclusions that reach across
borders, income levels, gender or socio-economic status. Even
though many of these anecdotal studies clearly support a role for
microfinance in achieving the Millennium Development Goals,
a key challenge in measuring the impact of microfinance is
obtaining reliable data. Sometimes clients are recipients of more
than one product, which are provided by more than one
microfinance institution (MFIs). MFIs, it becomes hard to obtain
measures on the exact impact of their services and products on
their clients' lives. We also do not have the answer to the
question of what proportion of the population even has access to
credit and savings
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FEW SCHEME OF MICROFANANCE
There are so many schemes for the upliftment of poor In Indore.
One of them Micro-credit programmes is run primarily by
NABARD in the field of agriculture and SIDBI in the field of
Industry, Service and Business (ISB). The success of Micro-
credit programme lies in diversification of services. Micro
Finance Scheme of SIDBI is under operation since January,
1999 with a corpus of Rs. 100 crore and a network of about 190
capacity assessed rated MFIs/NGOs. Under the programme,
total amount of Rs. 191 crore have been sanctioned upto 31st
December, 2003, benefiting over 9 lakh beneficiaries.
Under the programme, NGOs/MFIs are supposed to provide
equity support in order to avail SIDBI finance. But they find it
difficult to manage the needed equity support because of their
poor financial condition. The problem has got aggravated due to
declining interest rate on deposits. The office of the
development commissioner (Small Scale Industries) under
Ministry of SSI is launching a new scheme of Micro Finance
Programme to overcome the constraints in the existing scheme
of SIDBI, whose reach is currently very low. It is felt that
Government’s role can be critical in expanding reach of the
scheme, ensuring long term sustainability of NGOs / MFIs and
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development of Intermediaries for identification of viable
projects.
IMPORTANCE OF MICROFINANCE
In Indore, economic reforms with a human face have been
accepted as the guiding principle of sustainable development.
Keeping the poor at center stage, the policies need to be
reoriented so as to develop and optimize the potential of such a
large segment of the population and enable them to contribute in
the growth process significantly in terms of output, income,
employment and consumption. Viewed from this angle, our
survey results show that
1. Micro-Finance can be a powerful instrument initiating a
cyclical process of growth and development.
2. Micro-Finance activity improved access of rural poor to
financial services, both savings and credit.
3. Increased access signifies overcoming isolation of rural
women in terms of their access to financial services and
denial of credit due to absence of collateral.
4. The pool of savings generated out of very small but
regular contributions improved access of the poor women
to bank loans.
5. It could also help in strengthening poor families’
resistance to external shocks and reducing dependence on
moneylenders.
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6. The observed support for consumption smoothening would
not have been possible, but for the SHGs internal support.
Possibilities could be of explored for using SHGs as a strong
conduit for purveying crop cultivation loans to very small and
marginal farmers to step up crop loan finance.
IMPACT ON THE BANKS
The participatory approach to micro-finance has improved the
cost-effectiveness of poverty alleviation strategy by
substantially lowering transaction costs. While commenting on
the performance and impact of the project, the UNOPS
Supervision Mission observed: 'there is a transformation in the
attitude and approach of the participating banks to rural financial
services and especially rural clients. The innovative
methodology of MRCP has taken root and is now being
perceived by bankers to be a cost effective, efficient and viable
alternative for rural banking. Participating banks have become
more confident and skilled in extending credit to the rural poor
through groups and to individual clients'. A study of branch
level operations conducted by NABARD revealed that the SHGs
turned out to be a channel for social mobilization and women
empowerment, as also new business with quality clients and
significantly increased goodwill. Externalization of operating
costs in deposit mobilization, credit management and recovery
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through Village development Councils and SHGs were other
benefits which had a positive impact on the working results of
the branch.
CHALLENGES FOR MICROFINANCE
Microfinance has no doubt improved the lives of the poor in
Indore but sometimes it leads people to borrow too much, to the
extent that over indebtness can lead to suicides in extreme cases,
The main challenge facing the sector is identified as the need to
enhance borrower, public and regulatory support and
understanding, by increasing transparency in dealings with
borrowers and by educating the poor.
The sector is growing rapidly, both in the scale and in the
diversity of actors, and is sitting on the cusp of regulation. It is,
therefore, in the midst of rapid flux,"
For some time now, there has been a growing demand by
practitioners, financial institutions, policy makers, regulators,
the research community, the media and the development
community generally for a periodic, comprehensive and up-to-
date account of the sector.
Saying bankers and social venture capitalists are vitally
dependent on the success of the efforts of the training and
capacity-building service providers in easing human resource
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constraints facing the sector, and would like to know more about
their activities.
Insurance companies are interested in opportunities offered by
self help group (SHG) bank linkage programme, just as bankers
are curious about the opportunities that might lie in money
transfers.
"Additionally, not enough is known about the unfolding
priorities of the donors. Everyone is affected by what the
regulators in turn need to know more about the sector they are
charged with regulating,"
Indorian microfinance has continued growing rapidly towards
the main objective of financial inclusion, extending outreach to
a growing share of poor households and to the approximately 80
per cent of the population, which has yet to be reached directly
by the banks the self help group bank linkage programme -
covered about 14 million poor households in March 2006 and
provided indirect access to the banking system to another 14
million, including the borderline poor.
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SUGGESTION
There should be a favorable scheme of microfinance,
where there is no or less rate of interest on credit and
people can take loan easily which is convenient for the
poor people.
Develop small businesses that produce saleable goods,
such as traditional handicrafts.
Consult start-up microfinance programs that struggle with
operational, financial, or institutional sustainability.
Provide entrepreneurial skills training to conduct
feasibility studies, perform cost/benefit analyses, write
business plans, acquire financing, and initiate start-ups.
Research and analyze numerous topics that include local
economic conditions, migration patterns, obstructions to
economic growth, and efficacy of microfinance programs.
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CONCLUSION
In order to ensure that the poorest benefit from this growth, and
also contribute to it, the expansion and improvement of the
microfinance sector should be a national priority.
The impact of microfinance on the poorest is greater than on the
poor, and yet another that non-participating members of
communities where microfinance operates experience socio-
economic gains — suggesting strong spillover effects.
Moreover, well-managed microfinance institutions (MFIs) have
shown a capacity to wean themselves off of subsidies and
become sustainable within a few years. Microfinance is
powerful, but it is clearly no panacea. Our experience in the
business world has taught us that solutions marketed as cure-alls
to complex societal problems rarely if ever pan out as promised.
Microfinance does not directly address some structural problems
facing Indoren society and the economy, and it is not yet as
efficient as it will be when economies of scale are realized and a
more supportive policy environment is created.
The rest of Indore is catching on and catching up. According to
Sa-Dhan, the overall outreach is 6.5 million families and the
sector-wide loan portfolio is Rs 2,500 crore. Indore district is the
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most developing district in all over Madhya Pradesh, but people
of Indore is doing have any knowledge about Microfinance.
Than main cause behind lack of knowledge about Microfinance
is unawareness.
Bibliography
Researches
Dr.C.Rangarajan (2006) in his topic ‘Microfinance and its future
directions’.
Robert Peck Christen (2006) in his paper “Microfinance and
Sustainable International Experience and lesson for Indore”,
Lanmdau Mayoux’s study (1998) on Participatory Learning for
Women’s Empowerment in Micro Finance Programs (IDS
Bulletin, Vol. 29 No.4, 1998)
Elahi, K.Q. and C.P. Danopoulos (2004). "Microfinance and
third world development: A critical analysis." Journal of
Political & Military Sociology 32(1): 61-77.
Archana, S (2002) Types of SHGs and Their Work. Social
Welfare Issue, February: 16.
In Jerinabi, U. (2006) Micro Credit Management by Women’s
Self Help Groups.
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Discovery Publishing House: New Delhi
Edelsonbos, J. and Van Burren, A. (2005) the Learning
Evaluation: a Theoretical and Empirical Exploration.
Evaluation review
Fisher, T and Shiram, M.S (2002) Micro-Credit: Putting
Development Back into Micro-Finance. New Delhi, Vistaar
Publications.
Harper, M. (2002) Grameen Bank Groups and Self-Help
Groups; what are the
Books
CGAP, September, Financial Access 2010: The State of
Financial Inclusion through the Crisis
Economist Intelligence Unit October 2010; Global Microscope
on the Microfinance Business Environment
Kumar Ranjit (2008),Research Methodology; A Step By
Step Guide for Beginners, Pearson publication.
Microfinance perspectives and operation (2003), Indian institute
of banking and finance,Macmillan publication.
Websites
www.microfinance.org ,
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www.gdrc.org
www.sa-dhan.org
www.microfinancegateway.org QUESTIONNAIRE
Dear Respondent,
I am student of Maharaja Ranjit Singh College
of Professional Science (MRSC) and pursuing MBA. This
survey is designed for the village People of Indore to determine
the benefits provided by Microfinance services.
Kindly spare your precious time to make my study complete.
SECTION A:Name of Respondent:City :
Gender : Male □ Female □Age : ≥ 25 25-35 35-50 50 ≥
INCOME ABOVE: upto1-LAKH upto2-LAKH 4-5-LAKH MORE THAN 5LAKH
SECTION B: Q.1) Do you have any knowledge about microfinance?
(a) Yes □ (b) No □ If No then why……………. Q.2) Do you avail the facilities of microfinance schemes?
(a) Yes □ (b) No □ Q.3) Do you think Microfinance help to reduce poverty?
(a) Yes □ (b) No □ (c) Don’t Know □
Q.4) what are the Source of income?
(a) Farming □
(b) Self Generated □ (c) Labouring □
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(d) Business □ (e) Others □
Q.5) what is the source of Microfinance?
(a) Informal Source □ (b) SHG Groups □ (c) Banks □ (d) Others □ Q.6) from where you come to know about Microfinance?
(a) Family member & Relatives □ (b) Friends & Peers □ (c) Magazines & Generals □ (d) Others □ Q.7) how long have you been using Microfinance?
(a) None □ (b) 0 year to 2 years □ (c) 2 years to 3 years □ (d) More than 3 year’s □
Q.8) what is your basic objective at the use of microfinance?
(a) Reduce Poverty □ (b) Increasing Income □ (c) Empowering of women □ (d) Self Employment □ Q.9) Which Factors influencing the growth of microfinance?
(a) Availability of loan □ (b) Flexibility □ (c) Low interest rate □ (d) Installment availability □
Q.10) Do you find any change in standard of living after using microfinance scheme?
(a) Strongly Agree □ (b) Agree □ (c) Neutral □ (d) Disagree □ (e) Strongly Disagree □
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